IHS JANES

Navigating the Emerging Markets

INDONESIA

July 2017 ihs.com/janes

Guy Anderson
Senior Principal Analyst, A&D (Industry)

Paul Burton
Director, Defence Industry & Markets
Navigating the Emerging Markets | Indonesia

Contents
Military inventories 3

Principal contacts 8

Executive overview 9

Major procurement programmes 11

Defence spending 14

Defence and security spending: drivers 17

Political and economic overview 19

Procurement procedures 21

Procurement analysis 22

Offset policy analysis 26

Offset policy overview 29

Exports 34

Defence industrial capabilities 36

Defence industrial capabilities by domain 38

National defence companies by sector 41

Transparency and corruption 45

Relations with materiel producing countries 47

Credits 53

About 54

IHS™ Jane’s Navigating the Emerging Markets

COPYRIGHT NOTICE AND DISCLAIMER © 2017 IHS. For internal use of IHS clients only.
No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of
any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed
with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources
considered reliable, but its accuracy and completeness are not warranted, nor are the opinions and analyses that are based upon it, and to
the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage, or expense incurred by reliance on
information or any statement contained herein. In particular, please note that no representation or warranty is given as to the achievement or
reasonableness of, and no reliance should be placed on, any projections, forecasts, estimates, or assumptions, and, due to various risks and
uncertainties, actual events and results may differ materially from forecasts and statements of belief noted herein. This report is not to be
construed as legal or financial advice, and use of or reliance on any information in this publication is entirely at client’s own risk. IHS and the
IHS logo are trademarks of IHS.

© 2017 IHS 2 July 2017

Navigating the Emerging Markets | Indonesia

Military inventories
Source: Jane's Military Capabilities desk

Army: Armoured Vehicles

Platform Primary role Estimated in service First delivery date
Bushmaster Infantry Mobility Vehicle 3 2014
Leopard 2A4+ Main Battle Tank 42 2013
Leopard 2 RI Main Battle Tank 40 2016
AMX-13 Light Tank 140 N/A
PT-76 Light Tank 80 N/A
Scorpion 90 Reconnaissance Vehicle 57 1995
VBL Reconnaissance Vehicle 18 N/A
Scout Reconnaissance Vehicle 28 N/A
Ferret Reconnaissance Vehicle 24 N/A
Saladin Reconnaissance Vehicle 69 N/A
BMP-2 Infantry Fighting Vehicle 22 1998
Marder 1A3 Infantry Fighting Vehicle 42 2014
AMX VCI Armoured Personnel Carrier 100 N/A
Saracen Armoured Personnel Carrier 45 N/A
LAV-150 Armoured Personnel Carrier 140 N/A
Ranger Armoured Personnel Carrier 22 N/A
01-Apr Armoured Personnel Carrier 14 2004
APS-2 Anoa (Panser) Armoured Personnel Carrier 150 2009
BTR-40 Armoured Personnel Carrier 40 N/A
BTR-50PK Armoured Personnel Carrier 34 1997
Stormer Armoured Personnel Carrier 15 1995
Barracuda Armoured Personnel Carrier 44 N/A
VAB (Renault) Armoured Personnel Carrier 18 1997
Leopard 1 Recovery Vehicle 11 2015

Army: Artillery
Platform Primary role Estimated in service First delivery date
155 mm KH179 Howitzer 18 2014
CAESAR 155 mm Howitzer 37 2014
105 mm M101 Howitzer 170 N/A
105 mm M56 Howitzer 50 N/A
155 mm FH-88 Gun-Howitzer 200 1997
76 mm M48 Mountain Gun 50 N/A
70 mm NDL-40 Multiple Rocket Launcher N/A N/A
120 mm UBM 52 Mortar 80 N/A
81 mm Pindad Mortar 800 N/A
60 mm Pindad Mortar 600 N/A
60 mm M2 Mortar 50 N/A

© 2017 IHS 3 July 2017

Navigating the Emerging Markets | Indonesia Military inventories

Army: Anti-Tank Weapons

System variant Primary role
SS.11 Anti-Tank Guided Missile
MILAN Anti-Tank Guided Missile
9M14M Malyutka-M (AT-3 'Sagger') Anti-Tank Guided Missile
89 mm LRAC 89 Anti-Tank Rocket Launcher
3.5 in M20 Anti-Tank Rocket Launcher
84 mm Carl Gustaf Recoilless Rifle
106 mm M40 Recoilless Rifle

Army: Air Defence Weapons

Platform Primary role Estimated in service First delivery date
Kobra Self-Propelled Surface-to-Air Missile 2 2008
RBS 70 Man-Portable Surface-to-Air Missile 150 1982
QW-3 Man-Portable Surface-to-Air Missile 345 2006
Rapier Surface-to-Air Missile 150 1984
23 mm Giant Bow Anti-Aircraft Gun/Missile System N/A N/A
57 mm S-60 Anti-Aircraft Gun 200 N/A
40 mm L/70 Anti-Aircraft Gun 90 N/A
23 mm ZU-23-2 Light Anti-Aircraft Gun (Twin) 14 N/A
20 mm Anti-Aircraft Gun (Twin) 125 N/A

Army: Fixed Wing Aircraft

Platform Primary role Estimated in service First delivery date
NC-212-200 Transport 6 1984
DHC-5D Buffalo Transport 3 1996
BN2A Executive Aviation 1 N/A
Commander Jetprop 980 Executive Aviation 1 N/A

Army: Rotary Wing Aircraft

Platform Primary role Estimated in service First delivery date
Mi-35M Attack 8 2003
Mi-17 Utility 8 2004
Mi-17V-5 Utility 6 2008
AB205A-1 Utility 6 1978
Bell 412SP Utility 11 1986
Bell 412EP Utility 11 2012
BO 105C Utility 12 1978
BO 105CB Utility 2 1978
S-300C Trainer - Basic 14 1983

© 2017 IHS 4 July 2017

Navigating the Emerging Markets | Indonesia Military inventories

Air Force: Fixed Wing Aircraft

Platform Primary role Estimated in service First delivery date
Hawk 200 Series Combat/Light Attack 21 1996
F-16A Fighting Falcon Combat Multirole 7 1989
F-16B Fighting Falcon Combat Multirole 3 1989
F-16C Fighting Falcon Combat Multirole 9 2014
F-16D Fighting Falcon Combat Multirole 5 2014
F-5E Tiger II Combat Multirole 6 1980
Su-27SK Combat Multirole 2 2003
Su-27SKM Combat Multirole 3 2010
Su-30MK Combat Multirole 2 2003
Su-30MK2 Combat Multirole 9 2009
EMB-314 Super Tucano Trainer - Basic 15 2012
KC-130B Tanker 1 1961
C-130B Transport 3 1960
C-130H Transport 9 1979
C-130H-30 Transport 6 1981
L-100-30 Transport 4 1979
CN-235 Series 100 Transport 5 1991
CN-235 Series 220 Transport 1 2006
NC212-200 Transport 7 N/A
C295 Transport 9 2012
Boeing 737-200 Executive 1 2004
Boeing 737-400 Executive 2 2011
Boeing 737-800 Executive 1 2014
F28 Mk 1000 Executive 1 1983
F28 Mk 3000 Executive 2 N/A
Boeing B737-2X9 Maritime Patrol 3 1982
CN235 MPA Maritime Patrol 1 2008
Hawk 100 Series Trainer - Advanced 6 1996
T-50I Golden Eagle Trainer - Advanced 15 2013
G 120TP Trainer - Basic 24 2013
KT-1B Woong-Bee Trainer - Basic 16 2003
F-5F Tiger II Trainer - Operational 4 1980

Air Force: Rotary Wing Aircraft

Platform Primary role Estimated in service First delivery date
NAS 332 Super Puma Utility 10 1992
IAR-330SM Puma Utility 3 1984
EC 725 Utility 3 2015
SA-330L Puma Utility 2 1983
EC 120 B Trainer - Basic 11 2002
47G-3B-1 Trainer - Basic 11 1978

Air Force: Air Launched Missiles

Platform Primary role
AIM-9P-4 Sidewinder Air-to-Air
AA-10 'Alamo' Air-to-Air
AA-11 'Archer' Air-to-Air
AGM-65 Maverick Air-to-Surface

© 2017 IHS 5 July 2017

Navigating the Emerging Markets | Indonesia Military inventories

Navy: Submarines
Class Role In Service Commissioned
Cakra Type 209/1300 Attack 2 1981

Navy: Surface Ships

Class Role In Service Commissioned
Ahmad Yani (Van Speijk) Frigate 6 1967
Ki Hajar Dewantara Training Frigate 1 1981
Fatahillah Corvette 3 1979
Kapitan Patimura (Parchim I) Corvette 15 1981
Diponegoro (Sigma) Corvette 4 2007
Bung Tomo Corvette 3 2014
Dagger Fast Attack Craft - Missile 4 1979
KCR-40 Fast Attack Craft 12 2011
KCR-60 Fast Attack Craft - Missile 3 2014
Waspada Fast Attack Craft 2 2011
Todak (PB 57 NAV V) Patrol Craft 4 2000
Kakap (PB 57 NAV III and IV) Patrol Craft 4 1988
Singa (PB 57 NAV I and II) Patrol Craft 4 1988
KAL-36 Patrol Craft 13 2003
Sibarau (Attack) Patrol Craft 8 1968
Cucut Patrol Craft 1 1991
KAL-40 Patrol Craft 10 2006
PC-43 Patrol Craft 4 2013
PC-40 Patrol Craft 3 2017
Krait Patrol Craft 1 2009
Carpentaria Patrol Craft - Coastal 6 1976
Kal Kangean Patrol Craft - Coastal 65 1987
Tanjung Kambani Transport Ship 1 1982
Dore Transport Ship 1 1968
Makassar Landing Platform - Dock 5 2003
LST 1-511 and 512-1152 Landing Ship - Tank 2 1942
Teluk Amboina Landing Ship - Tank 1 1961
Tacoma Landing Ship - Tank 6 1981
Teluk Bintuni Landing Ship - Tank 1 2014
Frosch I Landing Ship - Mechanised 11 1973
Kupang Landing Craft - Utility 3 1978
Pulau Rengat (Tripartite) Mine Warfare Vessel 2 1988
Kondor II (Type 89) Minesweeper - Coastal 9 1971
OSV 190 Offshore Survey Vessel 2 2015

Naval Aviation: Fixed Wing Aircraft

Platform Primary role Estimated in service First delivery date
F-5E Multirole 7 N/A
CN235-220 Maritime Patrol 2 2013
DHC-5 Buffalo General Aviation - Executive 2 N/A
Searchmaster (N22 Nomad) Maritime Patrol N/A 1996
NC-212-200 Maritime Patrol 7 1996
PZL M-28 Maritime Patrol 7 2006
Baron G58 Trainer 2 2014

© 2017 IHS 6 July 2017

Navigating the Emerging Markets | Indonesia Military inventories

Naval Aviation: Rotary Wing Aircraft

Platform Primary role Estimated in service First delivery date
AS 332 Super Puma Utility 3 1984
BO 105CB (NBO-105 mission system Utility 6 1980
upgrade)
EC 120 B Colibri Utility 3 2001
Bell 412 Utility 4 1989

Naval Missiles
System variant Primary role
AM 39 Exocet Anti-Ship
SS-N-26 Yakhont Anti-Ship Cruise Missile

Marine Corps: Armour and Weaponry

Platform Role In service Commissioned
PT-761 Light Tank 30 N/A
BRDM-2 Reconnaissance Vehicle 14 N/A
AAV7A1 Amphibious Assault Vehicle 10 2009
BMP-3F Infantry Fighting Vehicle 54 2010
AMX-10 PAC-90 Infantry Fighting Vehicle 10 N/A
AMX-10P Armoured Personnel Carrier 19 N/A
BTR-4 Amphibious Armoured Personnel 5 2016
Carrier
BTR-80A Armoured Personnel Carrier 36 2001
BTR-50PK Armoured Personnel Carrier 100 N/A
105 mm LG1 Mk II Light Gun 20 1996
122 mm M1938 (M-30) Howitzer 28 N/A
122 mm RM-70 (M1972) Multiple Rocket Launcher 13 2003
122 mm Type 90B Multiple Rocket Launcher 4 2016
35 mm GDF Anti-Aircraft Gun (Single) 7 2011
40 mm Bofors L/70 Anti-Aircraft Gun (Single) N/A N/A
57 mm S-60 Anti-Aircraft Gun (Single) N/A N/A

© 2017 IHS 7 July 2017

Navigating the Emerging Markets | Indonesia

Principal contacts
Ministry of Defence
Defence Minister: Ryamizard Ryacudu (appointed in
October 2014)
Address: Jalan Medan Merdeka Barat No. 13-14 Jakarta
Pusat, 10020 Jakarta
Tel: (+62) 21 382 050
E-mail: ppid@kemhan.go.id and
redaksidmc@kemhan.go.id
Web: www.kemhan.go.id

Defence Facilities Agency

Part of the MoD, the Defence Facilities Agency oversees
procurement, R&D, technology transfer arrangements

Chief Executive: Rear Admiral Rachmad Lubis

Tel/Fax: (+62) 21 382 87 97
E-mail: ranahan@kemhan.go.id

Komite Kebijakan Industri Pertahanan

(KKIP) - Defense Industry Policy
Committee
The KKIP oversees Indonesia’s defence industrial policies
including offset and related collaboration activities.

Address: Kementerian Pertahanan RI, Gedung R Suprapto

Lt 1, Jalan Medan Merdeka Barat No. 13-14, Jakarta 10110,
Indonesia
Point of contact: Rear Admiral Rachmad Lubis, Head of
Technology Transfer and Offset
Tel: (+62) 21 384 85 38
Fax: (+62) 21 384 84 10

Jakarta Chamber of Commerce and

Industry

Tel: (+62) 21 380 80 91

Fax: (+62) 21 384 45 49
E-mail: sekretariat@kadinjakarta.or.id
Web: www.kadinjakarta.or.id

Corporate contacts
See section: National defence companies.

© 2017 IHS 8 July 2017

Navigating the Emerging Markets | Indonesia
Executive overview
Indonesian defence investment has been on a strong
upward trajectory for a number of years, with greater sums
directed towards equipment expenditure as Jakarta has
sought to recapitalise diverse, ageing inventories.
Strong economic growth has allowed Indonesia to ease the
chronic defence underfunding of past years and enabled the
Indonesian Armed Forces (TNI) to become better prepared
to respond to the country’s strategic concerns.
These include internal threats such as natural disasters and
insurgency and external drivers related to offshore
territorial disputes and growing concern about China’s
expansionism in the South China Sea.
Indonesia's defence budget increased by around 38% in real
terms between 2012 and 2017, rising from USD5.36 billion
to USD7.39 billion. Jane's Defence Budgets (JDB) forecasts
that the military expenditure will climb a further 17% by
2021, reaching USD8.67 billion.
Defence spending could increase further should Indonesia's
new president – Joko Widodo, who was inaugurated in
October 2014 – be successful in achieving his aim of
increasing the proportion of GDP that is allocated to
defence (about 0.77% as of 2017). However, economic
challenges emerging in 2016 suggest that this might be
unattainable.
In responding to strategic threats, Indonesia is committed
to modernising the TNI through a concept termed as
“Minimum Essential Force” (MEF): a strategy introduced in
2005 that aims to establish the nature of military
capabilities that Indonesia should, at a minimum, be able to
deploy in response to threats.
Early stages of the MEF plan are focused on internal threats
but subsequent phases are geared towards Indonesia
achieving military balance with any perceived threat within
Asia. It is also possible that the MEF could be accelerated
under Widodo, given escalating tension in the South China
Sea, where Indonesia is claimant to expansive territory and
assets.
Under the MEF major acquisitions that are planned include
multirole combat aircraft, large tactical transport aircraft,
additional submarines and a range of surface combatants.
Defence procurement spending is forecast by JDB to climb
by 36% between 2017 and 2021, rising from USD1.15 billion
to USD1.57 billion. In the past, capital expenditure is
supplemented by foreign bank loans.
© 2017 IHS
Military industrialisation is also a key component of the
MEF and is increasingly becoming a factor in determining
defence contracts. To this end, Indonesia has invested
heavily in its state-dominated defence industry base and
introduced legislation in 2012 - the Defence Industry Law -
to mandate local industrial participation in military
procurement programmes. The "Indonesia first" principal of
procurement was also enshrined in the act, although
continuing gaps in local capability mean that reliance on
foreign technologies will remain for many years.
Accordingly, Indonesia has a long list of military suppliers
and competition in the market is strong. Russia has
traditionally been Indonesia's military supplier of choice,
although European countries (particularly France, Germany
and the Netherlands), the United States and South Korea
are all gaining market share.
Challenges
Military spending
Despite repeated government pledges to boost defence
spending, the military budget remains way below 1% of
GDP (where it is likely to remain over the coming few
years). This reflects Indonesia's continuing priorities to
boost social welfare and infrastructure (and its
commitment to subside fuel) as well as what could be
regarded (in the past) as a questionable commitment to
military modernisation. Defence officials in Jakarta have
frequently argued the defence budget is inadequate to fully
provide for the country's military welfare, operational and
procurement needs.
Industrial capabilities
Indonesia aims to develop its defence industry base
through collaboration programmes between prime
contractors and local companies. An offset policy is also
planned, although this has been subject to delay. However,
industry capability in Indonesia remains relatively
unsophisticated meaning the burden on foreign contractors
can be high. A related challenge is skilled-labour shortages
and the low percentage of workers that have attended
university.
Cohesion
There also appears to be a lack of cohesiveness about
Indonesia's defence procurement plans. This leads to
various bold declarations about the scope of requirements,
9 July 2017
Navigating the Emerging Markets | Indonesia Executive overview

regardless of whether funding is available. For instance,

Indonesian officials have previously stated that the country
is seeking to purchase 180 Sukhoi fighters, although it is
clear that such a purchase would be beyond Indonesia's
economic means. Such statements are largely politicised
but they also point to a lack of rigid procurement planning.

Corruption
Corruption has been a problem with Indonesia's
governmental systems – particularly in defence – for many
decades. It is largely a result of uncontrolled access to funds
and diluted civilian oversight of budgets and other
administrative processes. In the past such unregulated
practices have led to a number of defence procurements
being subjected to illegal "price markups". The government
has attempted to inject increased transparency into
procurement processes, although weak enforcement of
laws remains a significant obstacle in such efforts.

Market Potential Index (MPI): Indonesia

Factor/risk Score Rating
Defence investment: 3.80 Positive
Procurement spending - Land 3.95 Positive
Procurement spending - Naval 4.10 Very positive
Procurement spending - Air 3.75 Positive
Openness 1.5 Below average
Transparency 1.5 Below average
Political risk 3.75 Very positive
Economic risk 3.56 Positive
Defence market risk 3 Positive
Overall market risk 3.52 Positive
Final market rating 2.75 Average
Note: 1 = high risk/low appeal. 5 = very low risk/very high appeal

© 2017 IHS 10 July 2017

Navigating the Emerging Markets | Indonesia
Major procurement programmes
Air
Anti-submarine helicopters (AS565)
In-service: 2016
Value: Up to USD400 million
Status: Active
Summary: Indonesia has a requirement to replace its
Westland Wasp helicopters, which entered service in 1981.
In April 2014 Airbus Helicopters announced that they
would be supplying 11 AS565 Panther anti-submarine
warfare helicopters for the requirement. Airbus had faced
competition from AgustaWestland (Super Lynx) and
Kaman (SH-2G Seasprite). The first three helicopters were
supplied to PT Dirgantara Indonesia in November 2016 for
re-assembly and outfitting before delivery to the
Indonesian Navy.
Attack helicopter procurement (AH-64E Apache)
In-service: 2017
Value: Up to USD500 million
Status: Active
Summary: Indonesia has operated a fleet of eight Mi-35
attack helicopters since 2008. The requirement remained
for addition units to create a full squadron. In August 2013
the US announced that it had agreed to sell Indonesia eight
new-build Boeing AH-64E Apache attack helicopters.
Boeing was awarded an initial contract for the programme
in January 2015. Deliveries are scheduled to commence
from mid 2017.
Large Tactical Transport (C-130)
In-service: From 2014
Value: USD90 million
Status: Announced
Summary: The Indonesian Air Force operates around 20
poorly maintained C-130s and these aircraft are unlikely to
remain in service beyond 2025. To this end, Indonesia
signed a memorandum of sale with Australia in July 2013
covering the supply of five used C-130H aircraft, which
were delivered later that year. It is also possible that the
requirement will be met through a requirement of Airbus
A400M aircraft. Jane's reported in 2017 that Jakarta was
looking to secure a USD2 billion purchase of five A400Ms,
with some of the funds sourced through export credit
loans.
F-5 Replacement
In-service: 2020 (estimate)
Value: USD480-1,200 million
Status: Announced
© 2017 IHS
Summary: The Indonesian Ministry of Defence announced
its selection in September 2015 of the Sukhoi Su-35
'Flanker-E' multirole combat aircraft to replace the
Indonesian Air Force's (TNI-AU's) ageing Northrop F-5E
Tiger II fighters. In 2017 Indonesia was known to be
continuing negotiations with Russia over the purchase. In
addition, a number of other platforms are bidding for the
contract (including Eurofighter Typhoon, Saab's JAS 39
Gripen, Lockheed Martin's F-16 and Dassault's Rafale),
which will be accompanied by a technology transfer
package to facilitate local involvement.
Tanker aircraft
In-service: 2020 (estimate)
Value: N/A
Status: Forecast
Summary: The air force operates a small number of ageing
Lockheed Martin C-130Bs as tankers but these are fast
approaching retirement age. Given that extending the
range of the air force's combat aircraft assets is an
important capability, Jane's forecasts that Indonesia will
seek to procure a replacement. The programme will depend
on funding and for this reason it is likely that an aircraft
conversion programme might prove attractive. In the
longer term dedicated tankers such as the Lockheed Martin
KC-130J or Embraer KC-390 may become affordable.
Heavy-lift helicopter
In-service: 2020 (estimate)
Value: USD300 million (estimate)
Status: Forecast
Summary: Indonesia has been looking to purchase an
unspecified number of Boeing CH-47 Chinooks from the
US since the 2004 tsunami. Short to medium term funding
issues make this unlikely before 2017, but in the longer
term the programme is likely. To this end it is notable that
Boeing and the Indonesian MoD met in February 2015 to
discuss Chinook collaboration. A plan to procure the
Chinooks could emerge in 2017 if funding allows.
Land
Marder 1A2 Infantry Fighting Vehicle
In-service: N/A
Value: N/A
Status: Committed
Summary: Following Singapore's purchase of 66 ex-
German Leopard 2A4 MBTs in 2007, Indonesia has been
seeking to modernise and expand its military to ensure it
11 July 2017
Navigating the Emerging Markets | Indonesia
maintains a competitive capability in the region. To this
end an agreement was reached with Germany in 2013
relating to the sale of heavy armoured systems. This
included the supply of 50 ex-German Marder 1A2 IFVs. The
total package was valued at USD4.3 million. The Marder
units were added in 2012 to an original request covering
Leopard 2 main battle tanks. The purchase of the Marder,
Leopard and related armoured recovery vehicle units (at a
cost of USD290 million) was confirmed by Rheinmetall in
late 2013.
8×8 wheeled armoured personnel carriers (BTR-4)
In-service: N/A
Value: USD50 million
Status: Committed
Summary: Indonesia and Ukroboronprom of Ukraine
announced in March 2014 that they had signed a contract
covering the supply of amphibious BTR-4 8×8 wheeled
armoured personnel carriers to the Indonesian Marine
Corps. The deal covered five BTR-4s, although there was
scope for expansion to 50 units.
Rantis 4×4 procurement programme
In-service: N/A
Value: N/A
Status: Active
Summary: Indonesia's requirement for a 4x4 military
vehicle has remained since the production of the locally
developed APR-1 was halted in early 2005 following the
tsunami. The TNI planned to introduce 100 APR-1
platforms, but only 14 were manufactured. The TNI signed
an agreement in 2012 with a defence industry working
group led by PT Pindad to jointly develop additional
prototype versions of the indigenously designed 4×4 Rantis
tactical military vehicle.
Bushmaster procurement
In-service: 2014+
Value: USD2.5 million
Status: Committed
Summary: In April 2014 Thales Australia won a contract to
supply three Bushmaster protected vehicles to the
Indonesian Army for use by Special Forces. Following on
from this, Thales entered an agreement with PT Pindad to
develop the 4×4 Sanca vehicle, which is based on the
Bushmaster but for TNI requirements. PT Pindad expects to
secure a contract for 50 Sanca vehicles in 2017.
BMP-3F Amphibious Infantry Fighting Vehicles
In-service: N/A
Value: N/A
Status: Completed
Summary: Indonesian Navy's Marine Corps ordered an
initial batch of 17 BMP-3F vehicles under a USD40 million
© 2017 IHS
Major procurement programmes
contract signed in 2008, which was funded by Russia. The
Marine Corps took delivery of the first tranche of BMP-3Fs
in December 2010. Indonesia ordered an additional 37
BMP-3F vehicles for the Marine Corps in 2012, with the
vehicles arriving through 2013 and 2014. The second deal is
worth USD114 million, although additional orders are
expected.
Sea
Submarines
In-service: 2018
Value: USD1.1 billion
Status: Committed
Summary: Indonesia has stated a requirement for at least
12 submarines, although budget realities will initially limit
the purchase. Indonesia awarded South Korea's Daewoo
Shipbuilding and Marine Engineering (DSME) a contract
worth approximately USD1.1 billion in December 2011
covering the supply of three Type 209 submarines. DSME is
building the first two submarines in Korea, while the third
boat is scheduled to be licence-constructed by PT PAL in
Indonesia from 2017. All boats are expected to be
operational by the end of the decade.
Fast attack craft procurement
In-service: To 2024
Value: N/A
Status: Committed
Summary: In recent years the Indonesian Navy has
accepted into service more than 10 locally built KAL-36/PC-
36M patrol craft and nine KAL-40/PC-40 patrol craft. A
new similarly sized patrol craft with missile armament
dubbed KCR is also being procured. There are two design
variants, a 44 m KCR-40 type and a 60+ m KCR-60. The
first unit, KRI Clurit, was launched in February 2011 and
delivered in late-April 2011. The programme initially
covered 10 units, but is expected to expand to cover at least
44 units by the mid-2020s.
Navy tanker replacement programme
In-service: 2014+
Value: USD80 million
Status: Active
Summary: The Indonesian Navy currently operates the
1960s vintage tankers Sorong, Balikpapan, and Sambu,
which are estimated to be approaching the end of their
service lives. The ex-UK Rover-class tanker Arun is also
ageing and may need replacement in the medium term. To
meet the requirement local shipbuilders (PT DKB and PT
Anugrah Buana Marine) are building two replenishment
ships, the first of which were inducted by 2015.
12 July 2017
Navigating the Emerging Markets | Indonesia Major procurement programmes

Surface Combatant Procurement Programme

In-service: 2017+
Value: USD250 million per unit
Status: Committed
Summary: The Indonesian Navy requires vessels capable of
economic exclusive zone patrol and surveillance as well as
search-and-rescue. Capabilities are also expected to extend
to combat roles. A SIGMA design proposed by the
Netherlands' Damen Schelde Naval Shipbuilding was
selected in August 2010 and the contract was finalised in
June 2012. A contract for a second unit was signed in
January 2013. Assembly and integration of both vessels
took place at PT PAL.

Mine countermeasures vessel

In-service: 2020
Value: USD215 million
Status: Forecast
Summary: TNI-AL chief of staff Vice Admiral Ade Supandi
announced in February 2015 that the navy is planning to
procure two mine-countermeasures vessels (MCMVs) to
replace its existing coastal minesweepers, which are
nearing the end of their service lives. Vice Adm Supandi
declined to provide details of the budget allocated for the
purchase, but he did hint that he is inclined towards
purchasing the platforms from a vendor that can build the
ships in Indonesia.

© 2017 IHS 13 July 2017

Navigating the Emerging Markets | Indonesia
Defence spending
Indonesian defence spending has been on a relatively
strong upward trajectory in recent years, facilitated by
strong economic growth that has averaged around 6% per
annum since 2011 and driven by the need to overcome a
long period of underinvestment to achieve what Indonesia
terms a “Minimum Essential Force” (MEF).
According to Jane's Defence Budgets, headline defence
spending in Indonesia stood at USD5.36 billion in 2012 but
climbed to nearly USD7.39 billion in 2017: overall growth of
nearly 40%. However, between 2017 and 2021 JDB forecasts
a significant slowdown in growth from USD7.39 billion to
USD8.64 billion: overall growth of 17%.
The Indonesian Armed Forces has suffered from chronic
under-funding in the past so growth up until 2016-2017 can
be viewed as bringing resources to a level sufficient to
support existing aspirations. It is for this reason that
defence procurement receives a relatively large portion of
the total budget (around 21% in 2017).
It should also be noted that Indonesian procurement has
been underpinned in recent years by foreign loans, ranging
from commercial arrangements with western financial
institutions to favourable packages from Russian lenders
specifically for the acquisition of Russian materiel.
Indonesia has aimed to reduce reliance on foreign lenders
by looking to domestic financial institutions, albeit with
limited success to date.
2016 adjustments
Upon the release of the 2016 draft budget in August 2015 it
emerged that Indonesia intended to reduce defence
expenditure by 1.7% to IDR95.9 trillion (USD6.9 billion)
with spending on defence falling from 4.9% of government
spending to 4.5%.
However, by the time the budget passed into law the
defence allocation had increased to IDR99.5 trillion,
providing a 2% increase over 2015 in nominal terms.
Defence spending: Total defence budget
2014 2015 2016 2017
USD billions, 6.59 7.76 7.46 7.39
constant 2017
% of GDP 0.79% 0.89% 0.81% 0.77%
Source: Jane's Defence Budgets
© 2017 IHS
Nevertheless, one month after the release of the draft
budget the defence commission of Indonesia's House of
Representatives (DPR) approved a proposal to increase the
proposed 2016 defence budget by a further IDR37 trillion in
order to allow the procurement of military equipment and
to improve the welfare of troops.
Subsequently, in June 2016, the Indonesian House of
Representatives' Defence Commission agreed a further
9.2% increase in the military's budget, taking total spending
to IDR108.7 trillion. Government officials said the
additional funds - made available due primarily to the
Indonesian government's decision earlier this year to scrap
fuel subsidies - will be directed to procurement activities
and upgrading military bases.
However, in late August 2016 the Indonesian armed forces
were asked to find savings equivalent to 7.3% of the 2016
defence budget as part of government attempts to reduce a
widening budget deficit.
The changes - if fully implemented - will see defence
spending reduced by IDR7.9 trillion (USD0.6 billion) to a
total of around IDR100.8 trillion for 2016. Assuming the
savings proceed at the mandated level then Indonesia's
defence budget for 2016 will represent a 1.5% reduction
compared to the 2015 budget of IDR102.3 trillion, and will
see defence spending fall from 0.9% of GDP to 0.8%.
Crucially, the latest revision represents the largest
reduction made to any single departmental budget under
the newly announced spending cuts.
Short-term outlook
The revisions made to the defence budget over the course of
2016 budget suggest that while the government is firmly
committed to increasing expenditure on the military,
defence spending may not necessarily be viewed as a
priority by the Indonesian government.
It also remains unclear whether the revised spending
targets will impact the 2017 budget, the draft for which was
submitted to the Indonesian Parliament earlier in August
2016.
2018 2019 2020 2021
7.23 7.44 7.9 8.68
0.71% 0.69% 0.70% 0.73%
14 July 2017
Navigating the Emerging Markets | Indonesia Defence spending

Under the proposed 2017 budget, defence expenditure was
already set to be cut by 3.9% from the IDR108.7 trillion
allocated in June 2016 to IDR104.4 trillion. Even if
spending remains at the level outlined in the 2017 draft
budget, defence expenditure will fall further as a
percentage of GDP.
It is Jane's view that, during the short term, the
government's attempts to ensure the budget deficit
remains at manageable levels will limit growth in the
defence budget. However, the revisions during the course
of 2016 also suggest that the government is aware of the
security challenges that Indonesia faces and will be willing
to provide additional funding in response to emerging
strategic challenges.
Therefore, growth is expected to moderate in the short
term compared to 2010-13.
Mid-term outlook
Looking further forward, the outlook for further expansion
of defence expenditure in Indonesia appears positive.
These have ranged from earnings from the military's
extensive (but declining) business interests to sovereign
loans. Banks in France, Russia and Switzerland have
provided Jakarta with credit in previous years to purchase
defence items (notably from Moscow).
There have been some efforts by Indonesia to wean itself
off such funding mechanisms, although in recent years
(since 2010) the practice has continued to a degree.
In 2015, for example, Tubagus Hasanuddin, vice-chairman
of the House of Representatives' defence commission said
Indonesia is discussing with Moscow the terms of a
USD3 billion loan to support its acquisition of Russian
military equipment. "Russia is ready to provide soft loans at
cheap rates to buy defence equipment," Hasanuddin said.
Moreover, in 2017 Jane’s reported that Indonesia was
looking to secure a USD2 billion purchase of five Airbus
A400M transport aircraft, with funds sourced through
foreign defence export credit loans.

Jane's retains the opinion that meeting the government’s

stated objective to allocate 1.5% of GDP to defence by 2020
is unrealistic and highly unlikely to be achieved, not least
due to the competition with other areas of expenditure
that appear more central to president Joko Widodo’s vision
for the next five years.

However, even modest progress towards this goal would

provide for substantial real-term growth in the defence
budget given the expansion of the Indonesian economy.

Off-budget resources
Historically, the gap between core military procurement
funds and the needs and aspirations of the TNI has
necessitated the use of unconventional means to underpin
materiel purchases.

Defence spending by category (USD billions, constant 2017)

2014 2015 2016 2017 2018 2019 2020 2021
Military 3.19 3.46 3.5 3.39 3.16 3.21 3.33 3.57
Personnel
Ops and 1.67 2.01 1.9 1.9 1.89 1.98 2.13 2.36
Maintenance
Other 0.19 0.29 0.41 0.38 0.34 0.33 0.35 0.39
Procurement 1.45 1.86 1.5 1.57 1.69 1.76 1.9 2.15
Research and 0.1 0.14 0.15 0.15 0.16 0.16 0.18 0.2
Development
Source: Jane's Defence Budgets

© 2017 IHS 15 July 2017

Navigating the Emerging Markets | Indonesia Defence spending

Defence spending by service (USD billions, constant 2017)

2014 2015 2016 2017 2018 2019 2020 2021
Air Force 0.79 1.07 1.02 1.03 1.06 1.12 1.23 1.4
Army 3.56 4 3.88 3.81 3.66 3.71 3.89 4.21
Defence-Wide 1.25 1.47 1.39 1.35 1.3 1.32 1.37 1.48
Navy 0.99 1.22 1.18 1.2 1.21 1.29 1.41 1.59
Source: Jane's Defence Budgets

© 2017 IHS 16 July 2017

Navigating the Emerging Markets | Indonesia
Defence and security spending: drivers
Accelerated defence spending is driven by the need to
secure sovereignty, maintain parity with neighbours; to
defend national infrastructure; to respond effectively to
natural disasters; and to drive economic growth through
military industrial development.
Social, industrial, economic rationale
In common with other high-population countries in Asia
(particularly Pakistan, India and China) Indonesia has long
struggled to address a list of social welfare and
infrastructure problems that have retarded the
development of an indigenous defence industry. In
Indonesia these priorities can be reflected in its traditional
defence budget allocation of less than 1% of GDP.
Forecasted economic growth for the coming years has
prompted Indonesia to change its priorities, however, and
now Jakarta sees defence industry development as a key
part of its long-term economic target, which the
government wants to achieve through an emphasis on
productivity and innovation. This national target is to
become one of the world's top 10 economies by 2025 and
one of the world's top six economies by 2050. According to
the International Monetary Fund, Indonesia was ranked
16th in 2016.
Indonesia aims to promote a transition from low-end
manufacturing and agriculture to advanced industry
sectors. Indonesia also sees enormous economic potential
in the natural resources in the seas surrounding its coasts.
As Indonesia attempts to stimulate this growth and puts
more emphasis on creating quality employment, major
challenges will include the low skills-base and under-
education of those in and out of jobs (for example,
Indonesia faces a significant shortfall in engineers and
technicians) and growing labour protectionism, which, for
example, limits a working week to 40 hours (putting it at a
comparative disadvantage with regional industrial rivals
such as Vietnam and China).
Strategic rationale and external affairs
Indonesia's strategic concerns are focused on ensuring a
supply of defence equipment; the security of its territory
and abundant natural resources; and the safeguard of its
people and interests against natural disasters.
The first of these concerns is linked to the military embargo
imposed on Indonesia by the US from the 1990s until
© 2017 IHS
2005 in response to Jakarta's alleged human rights abuses
in East Timor. Indonesia's military suffered heavily as a
result, particularly its air force, which was forced to
cannibalise many in-service US platforms such F-16s and
C-130s. Although sanctions were lifted some years ago, the
lessons learnt led Jakarta to diversify its supplier base as
well as to promote the development of its indigenous
defence industry.
Strategic concerns related to Indonesia's natural resources,
particularly oil and gas, are highlighted by its occasional
disputes with China, which usually occur in Indonesian
waters in the South China Sea, notably in seas surrounding
the Natuna Islands. Although China remains an important
trading partner to Indonesia, Jakarta is becoming
increasingly wary of Beijing's emphasis on power
projection coupled with its soaring energy demands. This
serves as a reminder in Jakarta that naval and surveillance
capabilities need to be upgraded rapidly and prompted the
government in 2014 to commit to deploy significant
military assets (including Sukhoi fighter aircraft and
Apache helicopters) on the Natuna Islands. It is also notable
that in September 2015 the Indonesian government
pledged to allocate further funds to boost defence
capabilities on the Natuna Islands. This pledge was
reiterated in 2016.
Concerns over territory are linked to relations between
Indonesia and other Southeast Asia states, particularly
Malaysia. The two countries have a history of rivalry and in
recent decades have had numerous territorial disputes, the
most recent being in 2009 over the oil-rich Ambalat area
which resulted in a military stand-off.
Natural disasters have become a great challenge for
Indonesia. These are most vividly illustrated by the Acer
tsunami in December 2004, although the country
continues to endure similar (although less devastating)
disasters on a regular basis.
Internal affairs
Internal security threats have declined in recent years,
although Indonesia continues to face some threats from
separatist and extremist groups. Separatist forces continue
to operate in Papua, though the threat has diminished in
Aceh since the conclusion of a peace agreement in 2005
after a 30-year conflict. Although the threat posed by the
regional Islamist militant group Jemaah Islamiyah has
declined in recent years, terrorism remains a significant risk
in Indonesia and continues to contribute to the local
security agenda.
17 July 2017
Navigating the Emerging Markets | Indonesia Defence and security spending: drivers

Outlook
There is growing concern in Indonesia about Chinese
activity in the southern reaches of the South China Sea (in
particularly in territory that is claimed by both countries).
In light of this it is possible that the TNI might reconsider
the trajectory of MEF programme. Sources in Jakarta have
told Jane’s that it is possible that the MEF could be
reassigned as an “optimum essential force” that would
signify a requirement to accelerate the acquisition of
capability to respond to external threats.

The Indonesian Ministry of Defence’s Defence White Paper

– published in late May 2016 – makes clear that the
country’s primary strategic concern is "unresolved border
issues", and also underscores its anxieties related to Chinese
military modernisation. “Chinese economic growth [has]
enabled [it] to modernise its military," said the document.
"This condition ... creates worry about the military balance,
thus, it can be a security dilemma for countries in the

region."

© 2017 IHS 18 July 2017

Navigating the Emerging Markets | Indonesia
Political and economic overview
Indonesia's capacity to meet defence procurement goals
hinges, as elsewhere, on the growth and stability of the
economy as a whole. This is particularly true in the case of
Indonesia given Jakarta's aim of reducing reliance on "off
budget" funding streams such as foreign loans. Growth has
been relatively strong in recent years, and since 2009 the
country's economy has been one of the fastest growing in
Southeast Asia, bolstered by rising commodity prices and a
surge in both local and international confidence on the back
of a series of trouble-free elections which pointed to
stability.
Economic growth has also been supported by reforms and
the absence of turmoil in politics. The economy is on a
reasonably sold path; public finances have improved; and
the government, under the Widodo administration that
came to office in October 2014, has managed to widen its
tax base and discontinue expensive non-diesel fuel
subsidies.
Despite this background, in 2015 and 2016 problems started
to emerge in the Indonesian economy, which had the effect
of decreasing the country's defence budget. Since President
Joko Widodo came to office the country's economy has not
performed as hoped.
Accordingly, GDP growth in 2015 was its slowest in six years
on the back of weakened exports and foreign direct
investment, although expansion in excess of 5% is expected
from 2016.
Economic outlook
The rate of Indonesia's economic expansion has slightly but
steadily slowed in the last few years, primarily as a result of
worsening net exports (largely a result of the economic
slowdown in China) and the impact of the country’s
widening deficit.
Exchange-rate volatility has also drastically increased, with
recurrent sharp depreciation episodes leaving the rupiah
some 50% weaker against the dollar than in 2012.
Moreover, Indonesia's attractiveness as an investment
Economic overview
2014 2015 2016
GDP (USD billions) 835.59 875.52 919.47
GDP (% growth YoY) 5.12% 4.78% 5.02%
Inflation (% YoY) 6.36% 6.86% 3.62%
Source: IHS Global Insight
© 2017 IHS
destination has been dulled by a lull in economic reforms,
weaker external demand, and the continuing deficit. This
was reflected by a decline in foreign investment in 2016.
The Widodo administration initially seemed committed to
pursuing a much more aggressive reform agenda, focused
on improving the business climate. It certainly started with
a bang: an unpopular yet sorely needed elimination of non-
diesel fuel subsidies was announced in January 2015 after
initially reducing the subsidies within the first month of
the government's rule.
Nevertheless, delivering on the reform commitment will
not be easy, given that Widodo lacks strong support in some
sections of Jakarta, is a newcomer to high-level politics, and
lacks a dedicated, well-oiled party machine.
Growth through defence investment?
In common with regional peers (such as South Korea and
Malaysia), Indonesia appears to view defence investment as
a catalyst for the creation of high-value employment; the
reinvigoration of domestic industries; and – potentially –
economic diversification. In this sense it is also notable that
Indonesia is a strong advocate of industrial collaboration in
defence procurement programmes.
Indonesia’s defence industry collaboration policy (rather
like the historical procedures of neighbouring Thailand and
Malaysia) has relied on a degree of counter-trade: typically
of relatively low value-added commodities. The policy is
further support by the Defence Industry Law 2012, which
mandates military procurement from domestic sources
where practicable, and with maximum local production
benefits in other circumstances.
In the defence sector, some of the concerns about
Indonesia’s investment landscape were highlighted by the
visiting US Vice-President Mike Pence in April 2017.
He said that Indonesia’s investment climate needed to
adapt to support growth in US-Indonesia trade in areas
including defence.
2017 2018 2019 2020 2021
966.38 1,017.49 1,071.17 1,129.60 1,191.85
5.10% 5.29% 5.28% 5.46% 5.51%
4.40% 4.41% 4.10% 4.22% 5.06%
19 July 2017
Navigating the Emerging Markets | Indonesia Political and economic overview

Foreign direct investment (USD millions)

2011 2012 2013 2014 2015 2016
FDI Inflow 13,771 19,241 19,138 18,817 21,811 16,641
Source: UN Conference on Trade and Development World Investment Report 2017

“There’s much more that must be done to improve the
business and investment climate in Indonesia,” he said.
Such issues, he said, included concerns about intellectual
property rights, a lack of transparency surrounding
procurement, and local manufacturing requirements.
Education and opportunities
While Indonesian unemployment is not particularly high
by global standards (it stood at 6% in 2016), the skills of the
country's workforce are low. IHS Global Insight describes
Indonesia’s workforce as “under-educated”, with the
majority having had less than six years of formal education.
As of 2010 just 4% of the population held bachelor's degrees
(compared to 16% in India). The incentive to increase the
skill-sets of the population through defence expenditure is,
therefore, clear.
Political overview
Indonesia's democratic system matured under the rule of
President Susilo Bambang Yudhoyono; a former general of
the army who was in power from October 2004 until to
October 2014.
He gradually implemented wide-ranging political and
economic reforms that have provided for a greater degree of
stability. However, Indonesia's democratic transition has
faced numerous obstacles, ranging from powerful vested
interests to an immature party system and the centrifugal
forces of separatism. The government has been active in
advancing core causes such as investment promotion,
infrastructure development, job creation, and anti-
corruption efforts. Despite progress on all these fronts,
pervasive graft continues to affect business operations,
while deficient legal and regulatory frameworks reduce
transparency.
Widodo and defence modernisation
Unlike past Indonesian presidents Widodo was not a
military officer. What significance this will have on the
modernisation of the TNI remains to be seen, although
Widodo has outlined a commitment to defence
development. "We will improve the professionalism of TNI
by modernising [its military systems],” said Widodo at 69th
Indonesian Military Day in early October 2014. “We have to
remain consistent.”
His pledges have focused on increasing defence spending
from the existing 0.8% of GDP to 1.5% of GDP by the end of
the decade, and the promotion of a better integrated TNI.
While the former is looking increasingly unlikely (as of
2017), the latter makes reference to some of the capability
weaknesses in the armed forces, in particularly advanced
C4ISR systems that enable force interoperability and
effectiveness.
Widodo appointed in late October 2014 Ryamizard
Ryacudu as defence minister, replacing Purnomo
Yusgiantoro, who had held the post since October 2009.
Ryacudu, a former general in the Indonesian Army, is
regarded as a hardliner who will be prepared to push for
military modernisation in light of the country’s growing
strategic challenges.

Having begun his presidency with minority support in

parliament, Widodo has gradually secured majority
support, most importantly from the second largest party in
parliament, Golkar. The party in May 2016 formally
announced that it had moved to the government coalition
from the opposition, giving the government bloc a clear
majority. However, political alliances in Indonesia are fluid
and parties may still oppose the government on a particular
issue, despite being formally part of a government coalition.

© 2017 IHS 20 July 2017

Navigating the Emerging Markets | Indonesia
Procurement procedures
Indonesia's defence procurement system is largely a work
in progress following the dilution of the armed forces'
involvement in military acquisitions since the fall of the
Suharto regime in 1998 after 31 years. The government,
headed by former four-star army general President Susilo
Bambang Yudhoyono to 2014, prioritised military
procurement reform and has introduced a raft of measures
that are aimed at centralising policies in a bid to reduce
opportunities for corruption as well as improve efficiencies.
In terms of Indonesia's external procurement strategy, two
key factors remain influential: the military embargo
imposed by the US from 1999 until 2005, and the
traditional shortfall in defence spending. Jakarta has
adopted in response a policy to diversify its suppliers based
not only on their ability to provide required capabilities but
also their willingness to offer credit, usually in the form of
bank loans.
Indonesia introduced legislation in 2012 (known as the
Defence Industry Law) to mandate procurement from local
sources (specifically, MoD owned companies) in practicable
circumstances. Should local solutions not be available or
appropriate, foreign procurements may proceed with the
approval of the country’s House of Representatives. The law
mandated local involvement even in the case of foreign
procurements through local production partnerships.
Legislation
Several laws cover defence procurement, all of which have
been introduced within the past decade.
Presidential Decree 80/2003; Government
Procurement of Goods and Services (replaced in 2011
by Presidential Regulation 54/2010: Regulates selection
and evaluation methods as well as contracting systems and
regulations related to integrity pacts, transparency,
competition, value for money, and accountability. The
legislation is coordinated and implemented by the National
Agency for Government Procurement Policy
(www.lkpp.go.id/v3/en) and the MoD's Defence Facilities
Agency (ranahan.kemhan.go.id)
Permenhan No: PER/06/M/VII/2006: Regulates the
supply of goods and services to the Ministry of Defence and
the armed forces through export credit facilities. Export
credit facilities can be used in procurement valued at more
than IDR50 billion.
Permenhan No: PER/07/M/VII/2006: Regulations related
to procurement of goods and services through non-export
© 2017 IHS
credit facilities such as the national budget.
Defence Industry Law (known locally as UU No.16
2012): Introduced in 2012, the law mandates procurement
from local sources where practicable. Foreign
procurements may still proceed, but with the authority of
the Indonesian House of Representatives. Foreign
procurements must now be accompanied by local
workshare through production partnerships.
Tenders
Tenders are issued by the MoD's Defence Facilities Agency
(ranahan.kemhan.go.id).
Awarding bodies
Contracts are awarded by the Defence Facilities Agency's
procurement committee in collaboration with the Ministry
of Finance. Major contracts require Cabinet approval.
Types of tenders issued
Three tender processes are outlined by the regulations:
• "Public Tenders" are the open invitation to all qualified
bidders, which must be either listed as capable
contractors or pre-qualified by a tender committee.
• "Limited Tenders" must have at least five qualified
bidders solicited through public announcements.
• In contracts between IDR15 million and IDR50 million
"direct selection" can be used. Contracts below
IDR15 million are reserved for smaller SME contractors.
Administrative bodies
In January 2011 the MoD set up the Defence Facilities
Agency (DFA), which replaced the Directorate General of
Defence Facilities. The agency has a dedicated procurement
centre, which undertakes all associated administrative
tasks. The DFA is supported by the MoD's Defence
Industrial Policy Committee (KKIP), which was established
in late 2010 to introduce reforms related to defence
procurement and industrial development. Such reforms
include a procurement roadmap, which would chart
development and match military requirements against
industrial capabilities, and defence offset rules.
21 July 2017
Navigating the Emerging Markets | Indonesia
Procurement analysis
Indonesia has been working in recent years towards the
increased centralisation of procurement procedures. The
influence of the military is being diluted (in part to reduce
opportunities for corruption) and civilians are gradually
playing a greater role in the decision-making processes.
Indonesia has also looked to countries such as Australia,
France and Russia to learn from foreign procurement
practices.
While Indonesia has introduced a series of procurement
reforms, it has been accepted that room for improvement
remains. In 2013 the Indonesian MoD announced that
further investment would be made in enhancing human
resource (HR) competencies in order to ensure value for
money and accountability. Meanwhile, Rear Admiral
Rachmad Lubis, former head of the Indonesian MoD’s
Defence Facilities Agency, said in September 2013 that
procurement methods that need to be enhanced in
Indonesia included those related to financial management,
negotiation techniques, project management, the drafting
of contracts and quality management techniques.
Further measures were introduced in 2015 to reduce
bureaucracy and improve accountability. While mainly part
of an effort to eradicate corruption in military
procurement, the measures – part of a so-called MoD
“integrity charter” signed in April – are also geared towards
enhancing procurement professionalism.
Centralisation
Following the former president Suharto's resignation in
1998 after more than three decades in power, reform of the
defence and security sector was introduced through which
the military has gradually been removed from procurement
systems. These reforms accelerated under the 10-year
tenure of Susilo Bambang Yudhoyono (president from 2004
to 2014), who took a leading role in consolidating all
military procurement in the MoD.
The centralisation approach, which is underpinned by
accompanying legislation, is designed to reduce corruption
in the military procurement process, which has long been a
lucrative source of money to some of those involved in
arranging and approving the transactions. The approach is
also designed to improve administration efficiencies.
Reforms
Procurement reforms initially focused on the introduction
of procurement laws and removing the military from
© 2017 IHS
decision-making processes. However, the government plans
to initiate additional measures to address continuing
bureaucratic delays, increase transparency (and therefore
reduce opportunities for corruption) and to improve
efficiencies.
Changes that are being considered include those related to
contracting and administrative systems and introducing
higher levels of civilian expertise into procurement
processes. In April 2011 the Indonesian House of
Representatives' defence commission said it would send
some of its members to France, Russia, the US and Turkey
to observe acquisition processes and, presumably, to
introduce examples of best practice into domestic
processes.
In addition, Indonesia had previously hoped to introduce an
e-procurement system with electronic bulletin boards into
defence from 2012. Such a system has already been
introduced into the oil and gas sector, although there is
resistance against the introduction of the process into
defence because of associated sensitivities. As of 2017,
however, there is no e-procurement system for defence
tenders.
Drivers of procurement
Indonesia's standing in the region, its geographical position
on the edge of some of the world's most important sea
lanes; and its growing interests (particularly natural
resources such as oil and gas) are all driving procurement
strategies. More recently the government has also indicated
that its defence industry development programme will also
be used as a factor in deciding acquisition programmes.
Such an approach would favour deals that incorporate
technology transfer.
Indonesia's military inventories are also in dire need of
modernisation. The scale of the problem was detailed in
June 2011, when the MoD's then Director General for
Defence Planning, Air Vice Marshal Bonggas S Silaen, said
the average age of military equipment in service with the
Indonesian armed forces is between 25 and 40 years and
that barely 30-35% of equipment owned by the armed
services was operational to a satisfactory level.
Loans
Despite the existence of a range of defence procurement
procedures in Indonesia many major acquisitions are
22 July 2017
Navigating the Emerging Markets | Indonesia
facilitated by – and depend on – foreign loans and export
credit facilities extended to a defence exporter by an
Indonesian lender, usually a state-owned bank. Access to
foreign funds and an exporting country's willingness to
enter credit arrangements with Jakarta have, therefore,
determined Indonesia's defence procurement relationships.
The government has stated that it wants to reduce this
dependency in future years should its economic standing
improve, but there has been a stated acceptance that such
reliance is likely to continue for some time. As an example,
Indonesia announced at the close of 2013 that a
USD400 million finance package had been agreed with
Russia’s Vnesheconombank to fund the purchase of Sukhoi
aircraft.
In 2015 further loans from Russia and local banks were
being discussed in view of an anticipated shortfall in
defence procurement spending in 2016. In September the
Ministry of Finance selected PT Bank Negara Indonesia to
provide credit to the TNI worth IDR980 billion to support
21 unspecified military procurement programmes. In the
same month Tubagus Hasanuddin, vice-chairman of the
DRP's defence commission, revealed that the government
was also looking to secure a loan from Moscow worth
USD3 billion to fund what were described as "major"
acquisitions from Russia.
These acquisitions are likely to include the Sukhoi Su-35
'Flanker-E' multirole combat aircraft that the MoD has
repeatedly expressed interest in acquiring in recent years to
replace the Indonesian Air Force's ageing Northrop F-5E
Tiger II fighters. Indonesia is also reportedly interested in
acquiring Russian Kilo-class submarines, although the MoD
has yet to confirm this.
Further to these developments Jane’s reported in 2017 that
Indonesia was seeking to support a planned acquisition of
Airbus A400M transport aircraft with export credit, with
the programme expected to cost USD2 billion.
Delays
This continuing dependency on export credit in some major
purchases means that when finances are not immediately
available – due to lack of funds in the defence budget or the
unavailability of export credit – procurement is often
delayed.
Jakarta's intended purchase of submarines, for example,
was delayed from 2009 and other programmes are behind
schedule. Such a scenario also reflects a lack of planning
and strategy, which the MoD is attempting to address by
the implementation of a procurement roadmap.
© 2017 IHS
Procurement analysis
Partnerships
Russia's willingness to offer loans has enabled Moscow to
assume a position as one of Indonesia's most important
procurement partners over the past decade. Indonesia has
purchased a range of military systems – such as Sukhoi
fighters, Mil helicopters and military vehicles – with nearly
all based on such credit deals. If Indonesia’s requirement to
rely on such funding mechanisms continues Russia is likely
to remain the country’s favoured military supplier.
However, Jakarta is evidently determined not to become
dependent on Moscow and has procured matériel from a
wide range of suppliers over the past decade including
China, United States, Germany, United Kingdom, France,
Italy and Netherlands. The strategy is largely a result of US
embargoes on Indonesia, which ran from the late 1990s
until 2005, and severely hindered the operational
capabilities of the Indonesian armed forces, particularly its
air force. Narrow reliance has therefore been avoided.
South Korea has also recently emerged as a key
procurement partner of Indonesia. The relationship is based
on a number of collaboration agreements between the two
countries and Seoul's drive to expand exports across
Southeast Asia. Jakarta announced in 2011 that it had
selected Korea Aerospace Industries' T-50 Golden Eagle to
meet its advanced jet trainer requirements and is also
supplying Type 209 submarines and infantry fighting
vehicles based on Doosan DST's Black Fox. Indonesia is also
participating in the development of the Korean next-
generation fighter aircraft.
In 2017 Indonesia was continuing with its long-held
strategy to forge ties with potential military suppliers, with
a view to supporting any purchases with industrial
collaboration and local content. Since 2015 government-to-
government agreements have been signed with the
Australia, Brazil, Canada, Croatia, India, Denmark, Japan,
Belarus, Azerbaijan and Colombia.
Moreover, Indonesian defence companies and related
agencies have recently signed accords with foreign
manufacturers including DCNS, Thales, Danish company
Odense Maritime Technology, Saab, BAE Systems, and
Japan's NEC Corporation.
These agreements covered aspects such as Indonesia's
potential purchase and licensed production of radars
(Denmark), the purchase of ShinMaywa US-2i search-and-
rescue aircraft (Japan), the production of select BAE
Systems products in Indonesia, cyber-security (NEC Corp),
and submarine and satellite technologies (Croatia).
US-Indonesia links
What is also notable is the gradual increase in US sales to
Indonesian through the Foreign Military Sale (FMS)
23 July 2017
Navigating the Emerging Markets | Indonesia
mechanism since Washington lifted its sales embargo in
2005. According to US government statistics, the value of
FMS sales in 2015 was USD162 million, and in 2008 it was
just USD4.9 million.
Another potential area for US-Indonesia collaboration
emerged in February 2015 when the MoD announced that
it was exploring a programme with Boeing centred on the
company’s CH-47 Chinook heavy-lift helicopter. The TNI
announced in June 2015 that will seek to acquire the
Chinooks from 2016. Jane’s understands that it is likely to
bid for four platforms. It is notable that the Indonesian
military does not operate any Chinooks and has limited
heavy-lift rotary-wing capacity. It has also maintained a
requirement to purchase Chinook's for several years,
although these ambitions have been constrained by budget.
Indonesia-US links were deepened further in May 2015 in
meetings in Washington between Indonesian defence
minister Ryamizard Ryacudu and US defense secretary
Ashton Carter. In a statement the Indonesian MoD
indicated a requirement for closer defence industrial and
technological co-operation in relation to Indonesia's
procurement of 24 refurbished ex-US Air Force (USAF)
Lockheed Martin F-16C/D fighter aircraft and eight new
Boeing AH-64E Apache attack helicopters.
The MoD added that Ryacudu had expressed to the US a
requirement to accelerate the delivery of both the F-16s and
the Apaches as well as the potential purchase of four Boeing
Chinooks, which could go to contract in 2016. The two
countries reaffirmed in late 2015 an intention to undertake
joint defence production programmes and by mid 2016
discussions about potential projects were continuing.
Other US sales to Indonesia in 2016 and 2017 featured AN/
AAQ-33 Sniper advanced targeting pods for Indonesia’s
F-16A/B fighter aircraft, and Honeywell’s provision of aero-
engines for Indonesia’s NC212i light transport aircraft.
Indonesia’s moves to secure partnership status with the US
is partly a response to concern in Indonesia about the
perceived lack of technology transfers to the country. This
is particularly the case regarding the Indonesian Air Force’s
F-16s and has caused concern in light of the US sanctions
imposed on Indonesia from the 1990s until 2005.
US Foreign Military Sales Deliveries 2005-2015 (USD thousands)
2008 2009 2010
FMS deliveries 4,945 1,604 15,617
Foreign 12,872 15,700 20,000
Military
Financing
Source: US DSCA Facts Book, as of 30 September 2015
© 2017 IHS
Procurement analysis
Another point worthy of note is the largesse of the United
States in supporting Indonesian military sales.
Since the resumption of US military aid to Indonesia in
2006, Indonesia has received consistent increases to its US
Foreign Military Finance (FMF) allowance. The allocation
stood at USD990,000 in 2006, but this had climbed to
USD14 million in 2015 and 2016 making Indonesia the
second highest recipient of US military aid in Southeast
Asia behind the Philippines.
Political influence
Indonesia is the largest country in Southeast Asia in terms
of area, population and GDP, and such stature often
prompts senior officials to make bold declarations about
the size and scope of Indonesian procurement
requirements. Seemingly fanciful Sukhoi fighter and
submarine procurement programmes – in which officials
stated Indonesia wanted to buy 180 fighter aircraft and 39
submarines – provide good examples.
Without access to funds and a clear outline of military
demands and strategy, the announcements sometimes
seem far-fetched and are regarded as largely symbolic. Such
prestige procurements have seemingly come at the expense
of more pressing - but lower profile - requirements such as
transport aircraft and offshore patrol vessels. This also
suggests that major procurements are often politicised and,
indeed, such a strategy was evident in the Indonesian
presidential election in 2009.
Agents and middlemen
Indonesia has long faced challenges related to the
involvement of middlemen and agents and other
intermediary officials, who are alleged to demand payments
for facilitating procurement programmes.
The problem can be linked to the traditional lack of
controlled access to funds and diluted civilian oversight of
budgets and administrative processes.
In August 2016 the problem was highlighted as a major
issue by President Widodo, who outlined a preference for
government-to-government defence trade to ensure
accountability and transparency.
2011 2012 2013 2014 2015
16,773 33,777 37,455 116,659 162,310
19,960 14,000 13,292 14,000 14,000
24 July 2017
Navigating the Emerging Markets | Indonesia Procurement analysis

Widodo also echoed former defence minister Juwono

Sudarsono (in post between 2004 and 2009), who famously
said that the involvement of middlemen led to some
acquisitions increasing in price by as much as 40%.

The continuing problem means that European and US

defence companies looking to expand in Indonesia – and
who must comply with export rules at home – often need
to be more diligent in securing exports and in making
contacts with decision makers.

"It just means we have more leg work," one industry official
told Jane's in 2015. "It means we have more to do in
Indonesia in getting our products known to the MoD."

© 2017 IHS 25 July 2017

Navigating the Emerging Markets | Indonesia
Offset policy analysis
Summary
Indonesia announced an offset policy in April 2014,
although it later transpired that the policy was incomplete
and was not in official use. As of 2017 Indonesia is
continuing to apply informal industrial collaboration
programmes to support defence procurement until a formal
offset policy is introduced. This may take some time,
however.
The industrial collaboration policy therefore remains
Indonesia’s informal approach to offset. The policy is
managed by the Defence Industrial Policy Committee
(KKIP) of the MoD and is supported by the Defence
Industry Law 2012 (UU No.16 2012), which commits the
Indonesian government to involve, whenever possible, local
industry in all defence procurement programmes.
The Defence Industry Law 2012 – otherwise known as Law
16 – is being applied (as of 2016-2017) in all major
procurement contracts awarded to foreign companies, the
KKIP has confirmed to Jane's.
Background
Having operated for many years without a defence offset
policy, Indonesia adopted a variety of counter-trade
strategies over the past two decades, including the barter of
non-defence commodities as well as indigenously produced
military equipment. An example of the former is
Indonesia’s purchase of two Su-27SKs and two Su-30MKs in
2002, which was paid for by a list of commodities including
coffee, palm oil, cement, rubber and bauxite.
Various examples exist of Indonesia's policy to barter
military equipment. They often include the counter-trade
of CN-235 military transport aircraft, which is licence
manufactured (from EADS-CASA) by state-owned PT
Dirgantara Indonesia. In 1999, Indonesia procured from
Malaysia 20 SME Aerospace MD3-160 light training aircraft
plus 1,500 Proton cars partly offset against the exchange of
three CN-235s, while in 1996 it agreed to supply South
Korea with eight CN-235s in exchange for military trucks
and armoured vehicles of similar value. In 2008, Indonesia
and South Korea considered the exchange of two South
Korean Chang Bogo-class submarines for eight Indonesian
CN-235 aircraft.
In addition to the counter-trade of military equipment,
Indonesia has also favoured a strategy of purchasing
military equipment using export credit and negotiating a
© 2017 IHS
level of technology transfer to enable localised
maintenance and support. Such an example is Indonesia's
purchase of a 2,400-ton frigate from Netherlands-based
Damen Schelde Naval Shipbuilding (See "Model
Purchases").
Legislation
The Law 16 was enacted in October 2012. This law mandates
industrial collaboration and outlines the recommended
introduction of a formal offset programme. As of 2016-17
Indonesia is continuing efforts to formalise the offset
policy but informal industrial collaboration remains the
primary approach.
The Law 16 (Defence Industry Law 2012) is available only in
Indonesian. It can be downloaded here:
www.kemendagri.go.id/media/documents/2012/11/22/u/
u/uu_no.16-2012.pdf
Administration
Under Law 16 industrial collaboration strategies and
programmes are managed by the MoD’s Committee for
Defence Industry Policy (KKIP).
Point of contact
Inquiries about offset or industrial collaboration can be
forwarded to: Rachmad Lubis, the head of technology
transfer and offset within the KKIP.
Postal address: Kementerian Pertahanan RI, Gedung R
Suprapto Lt 1, Jalan Medan Merdeka Barat No. 13-14,
Jakarta 10110, Indonesia.
Tel: (+62) 21 384 85 38, Fax: (+62) 21 384 84 10
Threshold
Under Law 16 there is no threshold related to industrial
collaboration.
Quota
Law 16 stipulates that the Indonesian government must, in
the first instance, look to procure defence products from
26 July 2017
Navigating the Emerging Markets | Indonesia
local industrial sources. When capability does not reside in
Indonesia, the government is permitted to source capability
from abroad but in such cases foreign industry must engage
with local companies.
This engagement must be through three channels:
countertrade, local content, and/or offset with emphasis on
technology transfer. The legislation adds that the existence
of countertrade, local content, and/or offset can be worth
no less than 85% of the value of the main contract.
Countertrade includes both defence and commercial
products, with priority assigned to the former. In addition,
local content - for example, localised production - must
have a value of no less than 35% and must increase by 10
percentage points every five years. This latter point is
intended to gradually expand local industrial engagement
in a defence procurement programme.
Obligations will be the subject of discussion between the
foreign OEM, local partners and the MoD's KKIP.
Fulfilment period
N/A
Multipliers
The KKIP has told Jane’s that offset multipliers are
becoming an increasingly important consideration even
though Law 16 provides only limited detail as to how such
requirements should be implemented.
Lubis, head of offset in the KKIP, said, “We will put more
emphasis on multipliers. We will assign multipliers of 3×
and 2× for strategic technologies that we want to develop in
Indonesia. We will also assign multipliers for foreign
companies that can support Indonesian industry to enter
their global supply chains."
Lubis explained that the term "strategic technologies" has
particular significance for the KKIP in terms of
implementing defence industrial collaboration.
This is reference, he said, to several suites of military
technologies and platforms that the government regards as
important for the country's security and wants to achieve
higher levels of industrial self-reliance. They include naval
vessels, fighter aircraft, tanks/military vehicles, missiles,
radars, propellants, and communications.
Direct/indirect
No stated preference under industrial collaboration, but
Indonesia has indicated that it will be flexible in allowing
both but preferring direct. This will be reflected in
multipliers.
© 2017 IHS
Offset policy analysis
Eligible programmes
The KKIP has said that local content components are
defined as design; engineering; the transfer of intellectual
property rights; the funding of infrastructure; education
and training provision; and after sales services.
These obligations can be channelled through various
activities including maintenance, repair, and overhaul;
refurbishment and modifications; joint production;
subcontracting; research and development; joint
development; and investment.
Counter-trade
Indonesia has not applied counter-trade obligations in
defence procurement for several years but Law 16 proposes
such a requirement in the form of a formal policy. As of
2017, however, there are no known programmes to have
progressed supported by counter-trade.
In Indonesia’s 2016 Defence White Paper this counter-trade
option was referenced as "yield trade" and was described as
a form of barter trade through which foreign contractors
will be expected to buy "products from Indonesia worth
50% of the contract value".
It also emerged in May 2017 that the counter-trade method
was being considered to support Indonesia’s potential
procurement of Sukhoi Su-35 fighter aircraft.
Offset banking
No guidelines.
Penalties
No guidelines.
Foreign direct investment
No guidelines. However, foreign direct investment (FDI) in
defence will be welcomed, given Indonesia’s efforts to
boost local capability.
Under Indonesian investment rules, FDI in strategically
sensitive areas such as explosives production are capped at
49%. Greater stakes are permissible in less sensitive
domains. Joint ventures between Indonesian and foreign
market entrants are encouraged.
27 July 2017
Navigating the Emerging Markets | Indonesia Offset policy analysis

Pioneer programme
While Indonesia has several model programmes to indicate
its industrial collaboration strategies (see below), the MoD
regarded its project to procure Ground Control Intercept
(GCI) radars as a pioneer programme for defence offset. It is
possible that this programme, which is delayed by more
than a couple of years, will set a number of parameters for
the policy.

Through this programme the MoD is pursuing technology

transfers in specific areas related to the acquisition.
Speaking to Jane’s in 2014 Lockheed Martin said it was
competing for the GCI programme (offering its TPS-77 air
surveillance radar systems) in alignment with a network of
Indonesian manufacturing and research partners.

If selected Lockheed Martin said it would provide new

employment possibilities for its local partners "estimated at
up to two million labour hours over the lifetime of these
radars". It added: "These Indonesian partners would be
capable of producing nearly USD100 million of radar
components per year."

Lockheed Martin said it has worked with the Bandung

Institute of Technology to produce an engineering
curriculum focused on radar technologies and its local
industry partners have started producing unspecified radar
components. Jane’s understands that in addition to
Lockheed Martin there are about seven other international
companies competing for the GCI contract.

© 2017 IHS 28 July 2017

Navigating the Emerging Markets | Indonesia
Offset policy overview
Indonesia has traditionally preferred to fund major defence
imports through export credit arranged through local banks
or via loans direct from the supplying nation. Use of the
method to fund military purchases funded through the
counter-trade of non-defence commodities has, to a degree,
largely disappeared by 2017, although Indonesia evidently is
still willing to support defence deals through the barter of
military equipment.
Indonesia's counter-trade strategy was initially aimed at
maximising benefits depending on the economic condition
of the country. When finances are particularly constrained
the barter trade of non-defence items has proved more
popular.
However, in recent years, as Indonesia's economy has
gradually improved, the country has put more emphasis on
facilitating deals through bank loans with technology
transfer agreements. This policy is largely informal and is
exercised on a case-by-case basis by the Ministry of Defence
(MoD), although it does not always provide Indonesia with
required results (for example, Indonesia has evidently not
been satisfied with levels of technology acquired through
its numerous deals with Russia).
As Indonesia does not yet operate a formal defence offset
policy, its strategy to boost indigenous capability is
channelled through defence industrial collaboration. This
effort is supported by a government commitment
(enshrined in Law 16) that commits the government to
seek to involve Indonesian companies in all major military
procurement.
Offset reforms
Indonesia has been attempting to introduce a formal offset
policy for some time. This is intended to formalise the
industrial collaboration and licensed manufacturing
strategies, enabling a more structured approach to defence
industry development. It is also intended to promote the
development of key skills in Indonesia that will have value
across a range of hi-tech sectors.
Jane's understands that it is unlikely that the formal
defence offset policy will be introduced soon, although Law
16 will remain the framework through which related
obligations are pursued.
By 2017 a formal offset policy still remained an objective,
but progress towards its introduction has been slow. In the
© 2017 IHS
meantime, Indonesia is retaining its strategy to develop
capability through industrial collaboration, whereby
foreign OEMs are expected to transfer technology and
know-how to enable licensed manufacturing or, to a lesser
degree, joint development.
Recent developments
In late 2016 officials from the KKIP confirmed to Jane’s that
Law 16 was being implemented in every defence purchase.
Officials also said that during 2017-18 the KKIP will also
look to push through measures to “tighten up” the offset
policy by filling a number of “holes”.
Officials said that priorities would be to introduce clauses –
in Law 16 supplementary documentation – that will
provide clarity on areas including multipliers, offset
banking, threshold, and penalties for non-compliance.
KKIP officials also confirmed that the agency had got better
at implementing the legislation and supporting industrial
co-operation programmes between foreign and Indonesian
defence companies. This included the KKIP now selecting
Indonesian companies that would partner foreign
contractors for offset.
Objectives
The objective of Indonesia’s industrial collaboration
programme is to spur advances in indigenous capabilities
and eventually reduce dependency on foreign suppliers. A
measure of Indonesia’s priorities in this regard was
indicated by Defence Minister Ryamizard Ryacudu in
December 2014.
He said: “State-owned companies or privately owned
businesses, we will support them as we gradually work
towards a target of building 90% of [Indonesia's] military
equipment over the coming 10 years.” As with many
statements from Indonesian officials this seems over-
ambitious but it does highlight a clear priority for defence
licence-production. Whether Indonesia’s industrial base
will develop capabilities to support such a target, however,
is debatable.
Industry revitalisation
Indonesia's decision to bolster defence industry capability
has been prompted by the poor condition of the country's
29 July 2017
Navigating the Emerging Markets | Indonesia
major state-owned defence companies, most of which
continue to suffer – to varying degrees – from financial
constraints, which stem from a lack of contracts and
investment.
Naval shipbuilder PT PAL, for instance, was forced in 2009
to enter a process of rationalisation through which around
half of its 2,000 employees were made redundant.
Aerospace manufacturer PT Dirgantara Indonesia (PTDI),
meanwhile, continues to remain under a financial cloud
owing to debts incurred more than a decade ago.
The significance of the industrial collaboration policy to
government plans to rebuild these companies was outlined
by then defence minister Purnomo Yusgiantoro in late
2010. The policy, he said, will be utilised "in every purchase"
of foreign defence equipment, adding: "The government is
determined to revitalise the defence industry: it is one of
the priorities of the cabinet."
Licensed manufacture
Driven by the requirement to boost local capability,
Indonesia is increasingly looking to augment defence
purchases with agreements facilitating transfers of
technology and know-how. This in turn is intended to
enable local licensed manufacturing of a defence platform.
As Indonesia’s capability in undertaking such programmes
evolves, it is worth noting that these programmes are
certain to present numerous obstacles for foreign OEMs
charged with integrating technologies into Indonesian
industry.
Model purchases highlighting Indonesia’s commitment to
industrial collaboration and licensed manufacturing include
orders in 2012 and 2013 of SIGMA 10514 guided missile
frigates designed by Netherlands-based Damen Schelde
Naval Shipbuilding, the 2011 acquisition of South Korea
submarines and, in air, the production of nine Airbus C295
transport aircraft, which were ordered in 2012.
SIGMA frigates
KKIP officials also confirmed that the agency had got better
at implementing the legislation and supporting industrial
co-operation programmes between foreign and Indonesian
defence companies. This included the KKIP now selecting
Indonesian companies that would partner foreign
contractors for offset.
Type 209 submarines
Indonesia is implementing a similar tactic in its 2011
purchase of three Chang Bogo-class Type 209/1200
© 2017 IHS
Offset policy overview
submarines South Korea's Daewoo Shipbuilding & Marine
Engineering (DSME). This programme outlines DSME's
construction of the first two submarines with gradually
increased input from around 200 PT PAL personnel. PT PAL
plans to build the third boat under licence at its facilities in
Surabaya, which were announced as complete in February
2017. This investment in capability is in light of Indonesia's
longer-term plans to introduce into service a further nine
submarines to secure its vast territory.
C295 transport aircraft
Airbus Military signed a contract in February 2012 with PT
Dirgantara Indonesia (PTDI) to supply nine C295s to the
Indonesian Air Force, with the deliveries starting in 2012.
The programme includes the transfer of technologies to
enable PTDI to manufacture C295 tail empennage, rear
fuselage and fuselage panels, and provide packages for the
development of computer-based training systems as well as
the creation of a C295 service centre and a final assembly
line in Indonesia.
The C295 programme is limited in its initial phase to nine
units, all of which were delivered to the TNI by 2014. In
February 2015 Indonesia and Spain agreed in principle to
expand the industrial collaboration programme to
potentially allow PTDI to licence produce the aircraft in
whole. The programme depends on Indonesia purchasing
additional numbers of C295 aircraft. Jane's understands that
the TNI has a requirement for a further seven units.
The PTDI-Airbus partnership could also feasibly expand
under Indonesia’s proposed A400M programme. Jane’s
reported in January 2017 that Indonesia has approved
USD2 billion in funding to acquire five A400M aircraft,
with funds sourced from credit.
If the programme goes ahead PTDI is expected to fit-out the
final three airframes. PTDI engineers will also visit Spain to
study and observe the assembly of various major aircraft
components, including wings and fuselage shells on the
first two aircraft.
Joint development
Industrial collaboration promoting joint development has
not, in the past, been a major thrust of Indonesia, although
more programmes are emerging as Indonesia has become
more ambitious. As of 2017 three joint development
programmes stand out: those featuring the Chinese C-802
anti-ship missile, the Korean KFX fighter aircraft, and a
medium tank programme with Turkey.
C-802 missiles
In March 2011 Indonesia and China signed a memorandum
of understanding over the joint development and
30 July 2017
Navigating the Emerging Markets | Indonesia
production of the Chinese-designed C-802 anti-ship cruise
missile. Industry partners on the programme will both be
state-owned: Indonesia's land systems specialist PT Pindad
and the China Precision Machinery Import-Export
Corporation, which is a subsidiary of defence enterprise,
the China Aerospace Science and Technology Corporation.
The agreement covers five areas of collaboration between
Indonesia and China: the potential sale of an undisclosed
number of C-802 missiles to Indonesia; joint development
of the system for Indonesian use; the transfer of Chinese
technologies to enable Indonesia to undertake assembly,
testing, maintenance, upgrades and training; collaboration
on the production of other unspecified related equipment;
and co-operation on the export and marketing of the
missile system to potential third-party customers.
KFX
Korea Aerospace Industries (KAI) and Indonesia signed
additional accords in January 2016 to facilitate their joint
development of the Korean Fighter Experimental (KFX)
aircraft. KAI signed in Jakarta a cost-sharing agreement
(CSA) with the Indonesian Ministry of Defence (MoD) and
a work assignment agreement (WAA) with PT Dirgantara
(PTDI).
The CSA formalises an earlier agreement over the cost
splitting of the KFX development programme. Indonesia
will pay 1% of the annual costs in 2016 and 2% of them from
2017 to 2025, by which time the development of the KFX is
expected to be complete. In total, Indonesia will pay nearly
20% of the expected KRW8.7 trillion (USD7.4 billion) KFX
development costs.
The WAA outlines the scope of PTDI's involvement in the
programme. This will feature elements of design, the
development of KFX prototypes (with PTDI's access to one
of six prototypes), the manufacturing of components, and
testing and certification. Under the WAA, Indonesia will
also gain access to technical data, specifications, and
performance information. KAI will also train PTDI
engineers and technicians, with an initial batch of 100 PTDI
employees seconded to KAI in May 2016.
In February 2017 KAI and PTDI set up a dedicated project
office for the KFX to support closer collaboration between
the two sides.
Fighter aircraft requirement
There is recognition in Indonesia that the country’s
capabilities in developing its aerospace industry can be
further boosted by its pending fighter aircraft requirement,
which is being contested by Saab’s Gripen, Lockheed
Martin’s F-16, the Eurofighter, and the Sukhoi Su-35.
© 2017 IHS
Offset policy overview
In 2016 Lockheed Martin and Saab both highlighted plans
to provide Indonesia with extensive offset packages to
support their respective bids.
Lockheed Martin’s offset proposal includes the localised
production of F-16 components, the development of a local
"systems engineering centre of excellence", technology
assistance with engineering and manufacturing, and
assistance with F-16 self-sustainment programmes through
training and technology transfers, which would be geared
towards supporting localised MRO.
The Saab industrial offer comprises three main avenues of
co-operation that will result in the creation of a "strong and
viable defence industry, with over 1,000 qualified job
opportunities and university graduates", Saab has said.
The offer includes the establishment in Indonesia of a
technology development centre focused on aerospace
engineering, which Saab said could be used to develop
technologies to support Indonesia's co-development of the
Korean Fighter Experimental (KFX) aircraft with South
Korea.
Another focus of the collaboration would be the
development of an Indonesian-Swedish innovation centre,
which would place emphasis on academic co-operation and
"education in entrepreneurship and innovation
management", said Saab. The initial focus areas of this
centre would be aeronautics, defence, infrastructure,
logistics and transport.
The Saab offer also includes local production of the Gripen,
although details about the workshare have yet to be
concluded with PT Dirgantara.
Medium tank
In November 2014 the governments of Indonesia and
Turkey signed a memorandum of understanding (MoU) to
jointly develop and produce a medium tank for the
Indonesian Army. The programme is led by FNSS Defence
Systems (a joint venture between Turkey's Nurol Holdings
and BAE Systems) and with collaboration from Indonesia's
state-owned PT Pindad. Following a design and
development phase, the two companies will jointly
construct two vehicle prototypes. One of these prototypes
will be built in Turkey and one in Indonesia, and both are
expected to be complete before the end of 2017.
Russian sales
Russia's position as Indonesia's dominant provider of
military equipment is unrivalled, with Moscow supplying
31 July 2017
Navigating the Emerging Markets | Indonesia
since 2007 Sukhoi fighters, BMP-3F infantry fighting
vehicles, Mi-17 and Mi-35 helicopters through a series of
credit loan deals. However, the Indonesia-Russian
partnership did not historically extend to joint
development programmes or even extensive technology
transfer programmes.
Russia's traditional preference to manufacture
indigenously before shipment to Indonesia is likely to stem
from Jakarta's lack of bargaining power in defence deals and
a lack of Indonesian defence industry capability. Most
Russian equipment has been acquired through loans from
either Russian banks of through export credit leaving
Indonesia little room to negotiate a commitment from
Moscow to transfer technology for anything other than
basic maintenance.
In May 2011 Indonesia's House of Representatives' defence
commission attempted to rectify this in meetings in
Moscow. Officials from Jakarta called on Russia to play a
bigger role in aiding the development of Indonesia's
defence industries. A statement said that the Indonesian
side "expects support" from Russia to enable maintenance,
repair and overhaul of all Russian matériel in service in
Indonesia.
The issue of support for Russian materiel in service with
the Indonesian military was raised again in late 2014.
Russian export agency Rosoboronexport agreed to enhance
the transfer of military technologies and related know-how
to Indonesia to improve local capabilities and the operation
of Russian platforms in service with the TNI. This was
followed in January by an offer from Russia encompassing
technology transfers, joint production in Indonesia of
components and structures, and the establishment of
maintenance, repair, and overhaul service centres in the
country.
Moreover, in 2017 Russian ammunitions company
Techmash said it was looking at setting up a facility in
Indonesia to support the localised production of 30 mm
and 100 mm-calibre artillery shells for Russian armoured
vehicles in operation by the Indonesian Armed Forces.
These activities are focused on Russia consolidating its
position in the Indonesian defence market in light of
increasing competition.
Counter-trade
Indonesia has – in the past – demonstrated a preference to
secure defence deals through the barter of non-defence
items and military equipment. The strategy has been in
place intermittently for around two decades but proved to
be an economic crutch following the economic crash of the
late 1990s when Indonesian finances were particularly
constrained.
© 2017 IHS
Offset policy overview
Since 2005, Indonesia's preference for deals involving the
barter of non-defence commodities has waned in favour of
deals through export credit, although Jakarta still seems
willing to barter military equipment. Indeed, the provision
is contained in Law 16, suggested future use of the policy is
possible.
An example of Indonesia's barter trade policy that involves
non-defence commodities is its order of Sukhoi fighters and
Mil Mi-35 helicopters from Russia in 2003.
The deal Russia focused on Indonesia's purchase of two
Sukhoi Su-30 multirole fighters, two Su-27 interceptor/
ground-attack aircraft and two Mil Mi-35 attack
helicopters. It was valued at USD200 million. The down-
payment for the purchase – thought to be around 10% – was
secured through bridging loans from the State Logistics
Bureau (which is responsible for food procurement), while
the remainder was paid through a list of commodities
including palm oil, coffee, rubber, bauxite, textiles and
computer equipment.
More recently, Indonesia discussed with South Korea the
possibility of procuring two Chang Bogo-class (Type 209/
1200) submarines in exchange for eight CN-235s in 2008,
while in 2011 South Korean sources indicated to Jane's that
Jakarta's selection of the Korea Aerospace Industries' T-50
Golden Eagle advanced jet trainer may be underpinned by
the counter-purchase of aircraft.
Rubber for Sukhoi fighters
In May 2017 the Indonesian MoD underscored the facility
through Law 16 to support defence acquisitions through
counter-trade or barter-trade.
Specifically, the MoD said it was considering bartering
rubber as part of the programme that will support its
proposed acquisition of Sukhoi Su-35 'Flanker-E' multirole
combat aircraft from Russia.
Indonesian trade minister Enggartiasto Lukita told
reporters in Jakarta on 18 May that the rubber deal was one
element of a range of offset activities that were being
evaluated by government agencies including his ministry
and the country’s attorney general’s office.
News that Indonesia was considering the barter of rubber in
the Su-35 contract came two weeks after the MoD said that
its plan to procure the aircraft has been delayed due to
“uncertainty” over offset-related requirements and
technology transfers.
The Indonesian defence minister Ryamizard Ryacudu said
in 2016 that the MoD was considering the acquisition of
eight Su-35s and that negotiations with Russia were
continuing.
32 July 2017
Navigating the Emerging Markets | Indonesia Offset policy overview

Collaboration challenge
Until a formalised defence offset policy is introduced in
Indonesia, industry collaboration – underpinned by Law 16 -
will be the vehicle through which development is sought,
although progress is likely to be slow while capabilities
remain at a relatively low level.

For foreign contractors tasked with collaborating with

Indonesian industry through technology transfers this lack
of local capability is likely to represent a significant
challenge.

It is notable that in the past Indonesia's defence industry

has been limited to mostly small-scale programmes.
Indonesian industry has proved capable of basic
maintenance and support of programmes although any
major modernisation programmes are outsourced. For
instance, recent Indonesian programmes to upgrade C-130s
and Cakra submarines have been awarded to Singapore and
South Korea respectively, while Indonesian companies
have largely focused on overhauling indigenously
manufactured products.

The challenge is further underlined in Indonesia’s

programme to build the third of three South Korean Chang
Bogo-class submarines indigenously. Jane’s understands
that South Korea’s DSME has retained significant concerns
about Indonesian capability to build the third boat in-
country, despite Indonesia’s investment in boosting local
construction facilities.

Looking forward, Indonesia’s industrial ambition is likely to

be continually restrained by actual capability. And as the
Indonesian Armed Forces’ requirements become more
sophisticated so will the challenges facing foreign OEMs.
An example is Indonesia’s multirole fighter aircraft
programme, which is being contested by Russia’s Sukhoi
Su-35, Dassault’s Rafale, the Eurofighter Typhoon, Saab’s
Gripen and Lockheed Martin’s F-16.

The multirole fighter requirement is certain to have strong

emphasis on local content but given Indonesian industry’s
almost non-existent exposure to combat aircraft
production in the past the programme could prove
troublesome to administer.

© 2017 IHS 33 July 2017

Navigating the Emerging Markets | Indonesia
Exports
Summary
Indonesia regards defence exports as a means to support
the advancement of domestic capabilities but international
sales to date have been limited both in terms of equipment
sold and the range of customers.
Previous sales have featured firearms, ammunition or
explosives as well as the CN-235 transport aircraft produced
by PT Dirgantara Indonesia (PTDI) under licence from
Airbus (with profits split on secured exports). Since 2000
PTDI-produced CN-235 aircraft have been exported to
countries including Malaysia, Pakistan, Senegal and South
Korea.
PTDI secured a new contract in 2017 to also supply the CN-
235 to Nepal.
Indonesia also sees future export opportunities for naval
vessels. Supported by an increasing number of Indonesian
Navy procurement programmes, Jakarta is investing in
developing naval shipbuilding construction capabilities and
has been encouraged to seek to penetrate naval export
markets by its sale to the Philippines in 2014 of two
strategic sealift vessels (SSVs). As of 2017 discussions over
the sale of an additional two SSVs to the Philippines were
continuing.
Indonesia has not published any statistics about the value
of its defence exports.
Authority
Indonesia does not have a dedicated defence export agency,
although opportunities are supported by the Ministry of
Defence (MoD) in collaboration with other government
bodies including the Indonesian Export Financing Agency
(IEFA) - also known as the Indonesia Eximbank.
Legislation
Indonesia has adopted several laws and regulations
governing the export of strategic goods. These are mainly
related to goods and materials, including nuclear, chemical,
and explosive materials. They cover export control,
licensing, and enforcement.
Export laws include these below:
• Law Number 17 of 2006 on Customs:
www.kemenkeu.go.id/en/Peraturan/law-republic-
indonesia-number-17-2006
© 2017 IHS
• Law Number 16 of 2012 on Defense Industry;
choromaster.files.wordpress.com/2015/03/uu_no_16_
2012.pdf
• Law Number 7 of 2014 on Trade: www.indolaw.org/UU/
Law%20No.%207%20of%202014%20on%20Trade.pdf
• Law Number 10 of 1997 on Nuclear Energy:
www.vertic.org/media/National%20Legislation/
Indonesia/ID_Law%20on%20Nuclear%20Energy.pdf
• Law Number 9 of 2008 on the Use of Chemical
Materials: www.vertic.org/media/National%
20Legislation/Indonesia/ID_CWC_Law.pdf
• Presidential Decree Number 125 of 1999 regarding
Explosives Materials: www.flevin.com/id/lgso/
translations/JICA%20Mirror/english/
45.Pres.125.1999.english.qc.html
Political issues
There is strong political backing for defence exports in
Indonesia based on the acknowledgment that such sales
can provide support for the government’s efforts to develop
its national defence companies – particularly the state-
owned sector.
Reflecting the scope of this support, the Indonesian Export
Financing Agency (IEFA) – also known as the Indonesia
Eximbank – announced in February 2017 that it would
support the country's biggest state-owned defence
manufacturers' efforts to expand in international markets.
To this end, the IEFA said it had ring-fenced an initial IDR2
trillion (USD150 million) for the country’s defence export
promotion project, with the funds offered to potential
customers in a bid to secure military exports.
The funds would be made available to aerospace company
PT Dirgantara Indonesia (PTDI), naval shipbuilder PT PAL,
and land systems specialist PT Pindad.
Jane's understands that the funds will be channelled into
specific programmes.
For instance, PTDI is targeting sales of the CN-235
transport aircraft to countries including Nepal, the
Philippines, Senegal, Thailand, and the United Arab
Emirates. PT PAL is exporting strategic sealift vessels (SSVs)
to the Philippines and is pursuing sales of the platform to
other regional countries, while PT Pindad is offering its 6×6
Anoa armoured personnel carrier and a range of firearms
and ammunition to countries in the Asia-Pacific region and
Africa.
34 July 2017
Navigating the Emerging Markets | Indonesia Exports

Export finance
Export credit is provided by the state-owned Indonesian
Export Financing Agency (IEFA) -
www.indonesiaeximbank.go.id/en

International obligations and sanctions

Indonesia is not a member of export control regimes.
However, the country’s has shown commitment to
preventing exports of strategic goods in line with foreign
policy regarding the proliferation of weapons of mass
destruction.

This commitment is outlined in the country’s various

strategic goods export control laws, which are detailed
above.

Markets
Several markets have been identified by the MoD and the
IEFA as export target regions. These include South Asia,
Southeast Asia, Latin America and Africa.

© 2017 IHS 35 July 2017

Navigating the Emerging Markets | Indonesia
Defence industrial capabilities
Indonesia's defence industry base is dominated by several
state-run firms – including naval shipbuilder PT PAL,
aerospace manufacturer PT Dirgantara Indonesia (PTDI),
land systems specialist PT Pindad, explosives specialist PT
Dahana and defence electronics company PT Len Industri.
These companies are supported by a dozen or so other state-
run companies and the private sector, which is growing
rapidly as Indonesian requirements expand. As of 2017 the
private sector includes around 70-80 companies involved in
manufacturing for the defence sector. The industrial base is
estimated to employ about 70,000 people.
In effect, the primary state-owned companies act as Tier 1
on all indigenous programmes with main component
production undertaken by both the Tier 1s and Tier 2
subcontractors, which include primary private-sector
companies such as PT Sari Bahari. Tier 3 subcontractors and
SMEs usually supply other smaller components and
systems and raw materials.
In the naval sector there appears to be greater scope for
major private sector companies to secure prime contracts.
For example, PT Palindo has produced KCR-40 fast attack
craft for the Indonesian Navy. This is primarily due to state-
owned PT PAL being over-stretched in terms of capacity and
Indonesia's perceived requirement to expand
manufacturing capability in the marine sector.
Core capabilities
The industrial base has well-established capabilities in
licence production programmes – such as small and
medium-sized transport aircraft and helicopters – although
the capability to indigenously design, develop and
manufacture complete platforms and systems is limited to
armoured personnel carriers, low-sophistication
communications devices, a range of small-scale naval
platforms such as offshore patrol vessels and fast craft.
It also is capable in low-technology areas such as the
production of small arms, ammunition, explosives and
propellants; and the maintenance, repair and overhaul of
indigenously produced aircraft and naval vessels.
In common with many developing nations Indonesia
retains considerable weaknesses in capabilities related to
the design and development of military systems (notably
naval platforms) and more advanced technologies, although
signs are gradually emerging of a capability to develop
surveillance systems and unmanned aerial vehicles (UAVs).
© 2017 IHS
Indonesia's defence industry has traditionally undertaken
the development of such systems without any significant
government support. Jakarta's defence industrial ambitions
have been limited in the past and this has resulted in a lack
of a cohesive strategy for research and development as well
as industrial development and procurement. It has also led
to a high dependency on foreign equipment – estimated at
about 70%.
Since 2008, however, the government has outlined a
commitment to develop the defence industry. Efforts to
drive defence industrial development were enshrined in the
broader Indonesia 2011-25 MasterPlan and – more
specifically – in the Defence Industry Law of 2012. An
example of the financial commitment made by Indonesia to
its national defence industry was the government’s move in
2015 to invest USD55 million in land systems specialist PT
Pindad to support the development of its production
facilities. In 2014 similar funding was also allocated to PT
PAL.
Defence Industry Law
Legislation was passed in 2012 to drive development of
national defence industries. The Defence Industry Act –
also known as Law 16 – was passed by the House of
Representatives in October 2012, and entered law later in
the year. Specific measures were as follows:
• Mandated procurement from local defence companies
in cases where this is practicable.
• Mandated indigenous involvement by obliging foreign
market entrants to form production partnerships with
local organisations; effectively offset in all but name.
• The provision of financial incentives to encourage
research and development investment.
• The encouragement of financial self-sufficiency (with
the reward of a future move to part-privatise (25%) state
defence companies that avoid losses).
• State-owned military production organisations (such as
PTDI and PT PAL were to be transferred from the
Ministry of State Owned Enterprises to the Ministry of
Defence to ensure close alignment with the armed
forces. However, by 2017 this objective had not been
achieved.
2016 White Paper
Indonesia's defence White Paper, published in May 2016,
outlined a requirement for a "strong and independent
defence industry" to support the country's efforts to
protect its sovereignty in light of growing regional tension.
36 July 2017
Navigating the Emerging Markets | Indonesia Defence industrial capabilities

The document stated that at the heart of Indonesia's
response to its strategic threats is the TNI's Minimum
Essential Force (MEF) strategy, and in building MEF
capability the White Paper states that several key activities
need to be pursued.
1990s and, as a consequence, the economic crash of 1997
did much damage to Indonesia. The country's defence firms
were badly hit prompting many to go bankrupt and the
restructuring of those remaining. PTDI, for instance, was
downsized from 18 divisions to four.

These include a "strong national defence capability"; The government initiated efforts to revitalise the defence
"strengthening defence management" and restructuring
industry base in 2008 with a commitment to implement a
defence organisations; strengthening military facilities;
cohesive industrial policy backed with a pledge to procure
better border protection; investment in information and
from indigenous sources and to grow defence spending. Part
communication systems; developing international
of this revitalisation plan involved the introduction of the
collaboration; and the "empowerment of the national
defence industry". Defence Industry Law 2012.

While the White Paper provides no details about the TNI's

military requirements over the coming decade, it does
provide clear indication of its procurement priorities. These
are highlighted as "priority programmes" for the
Indonesia's defence industry and include submarine
construction, propellants, rockets, missiles, radars, medium
tanks, and fighter aircraft.

The document states that Indonesia's key strategy for

developing industrial capability in these areas – in order to
support the TNI – is a commitment by the government to
prioritise procurement from local sources through the
Defence Industry Law 2012.

Defence industrial development -

history
Indonesia's defence companies were first encouraged to
develop in the 1970s with the signing of a parliamentary
mandate which attempted to reduce the country's
dependence on foreign manufacturers. Accompanying
legislation saw the amalgamation of several military assets
into what has since become Indonesia's largest defence
enterprise, PTDI.

The focus initially was on the production, maintenance and

repair of relatively low-scale systems, although
development was relatively slow until the early 1990s when
regional economies – including Indonesia's – grew rapidly
on the back of strong exports to the West. The early 1990s
also saw the ownerships of many military producers
transferred from the armed forces to the government.
During this period of expansion, Indonesia's defence
industrial base developed capabilities – largely through
licensed manufacturing deals – to produce light aircraft,
helicopters, transport aircraft, landing craft, patrol boats,
ammunition and firearms.

However, the government borrowed much foreign money

to support the growth of its manufacturing base during the

© 2017 IHS 37 July 2017

Navigating the Emerging Markets | Indonesia
Defence industrial capabilities by domain
Air
Indonesia regards its aerospace capabilities as a major
industrial strength. This is despite the sector's dependency
on foreign technologies and a distinct lack of depth beyond
the capabilities of the state-owned group PTDI, which is
focused on the licensed production, assembly and
maintenance, repair and overhaul of European designed
platforms such as the CN-235, C295 and NC212 transport
aircraft and the NAS-332 Super Puma. Another licensed-
production agreement is in place with Bell Helicopter,
featuring Bell 412EP utility helicopters for the Indonesian
Army.
In carrying out its various licence production programmes
PTDI is supported by a handful of small and medium-sized
enterprises. Capabilities required to indigenously design
and develop military aerospace programmes are evident in
the N219 turboprop transport aircraft and some unmanned
aerial vehicles.
Jakarta is aiming to augment indigenous aerospace
capabilities, however, through a number of activities.
Firstly, they include the added emphasis on industrial
collaboration that is intended to promote technology
transfer in aerospace licenced production programmes. This
has seen PTDI become involve in larger programmes such as
the Airbus C295 aircraft and possibly the A400M.
Secondly, Indonesia is looking to acquire aerospace
technologies through an agreement that it signed with
Seoul in January 2016 on the development of South Korea's
next-generation fighter aircraft (named KFX). This
programme will see PTDI collaborate with Korean industry
in its project to develop and produce a fifth-generation
fighter platform by 2025. Indonesia has agreed to pay 20%
of development costs in order to enter the programme and
gain access to advanced aerospace technologies.
The Indonesian government is looking to boost aerospace
capabilities further through the programme to procure
multirole combat aircraft. If the programme proves large
enough to support localised production, PTDI is expected to
play a major role, undertaking localised manufacturing of
some components and possible final assembly.
With this requirement in mind, Saab announced in October
2015 its intention to formally offer Indonesia a "Swedish air
power package" featuring its JAS 39 Gripen combat aircraft.
Saab said the offer will "significantly contribute to
Indonesian defence and security as well as the economy".
© 2017 IHS
Lockheed Martin and Eurofighter, which are also
competing in the programme, are offering similarly
attractive industrial programmes.
To support an expansion in capability, PTDI announced in
August 2016 plans to move its production facilities. The
new facility, which will measure up to 300 ha, will be built
on land surrounding Indonesia's new international airport,
which is currently under construction in Kertajati, West
Java, and is scheduled to open in 2017. The company said
the capacity of its existing 50-hectare facility in Bandung,
West Java, was "already too full", and that its new facility is
expected to be operational by 2019.
Another stated priority for Indonesia is to boost MRO
capability.
To support this emphasis in March 2017 several Indonesian
state-owned aerospace companies signed an agreement
with the government to collaborate on setting up a new
holding company that will provide commercial/military
aerospace MRO services.
The MOU is intended to support the development of
Indonesia as a centre for MRO in Southeast Asia, the
government said. The new company will be named
Indonesia Service Hub.
Indonesian companies to own stakes in the new entity
comprise PTDI; GMF AeroAsia, a subsidiary of Garuda
Indonesia; aero-engine service company PT Nusantara
Turbin dan Propulsi; MRO company PT Indopelita Aircraft
Services; and PT Merpati Maintenance Facility, a military/
commercial service provider operated by Merpati Nusantara
Airlines.
Land
Indonesia's land systems sector, which is dominated by
state-owned PT Pindad, is relatively self-sufficient having
developed and produced over the past decade or so the 4×4
Komodo armoured personnel carrier (APC) and the 6×6
Anoa APC (as well as a range of variants) and firearms,
ammunition, explosives, mortars and howitzers. PT Pindad
has also produced other firearms under licence from
Belgium's FN Herstal and Singapore Technologies
Engineering and has developed a new version of the Anoa,
called Badak, which is fitted with a 90 mm canon developed
by Belgium’s CMI Defence.
Indonesia's indigenous defence industrial capabilities have
been developed out of necessity. The development the
38 July 2017
Navigating the Emerging Markets | Indonesia
Anoa, for example, was accelerated in the early years of this
century when Indonesian Armed Forces were involved in
conflict with the Free Acer Movement. The Badak vehicle
has also been developed out of a TNI requirement. In
January 2016 PT Pindad received an order to supply the
Indonesian Army with an initial 50 Badak units. The value
of the contract is understood to be worth around
IDR500 billion (USD36 million) and features the
Indonesian company’s production of the CMI turret
system.
Indonesia has recognised a specific strength with
particularly its development of military vehicles and is
looking to enhance this capability further through a
partnership with Turkish company FNSS Savunma
Sistemleri announced in 2014 to jointly develop a medium
tank. PT Pindad has also signed agreements with Saab to
collaborate on the Swedish company’s Ground Based Air
Defence (GBAD) system and extend the operational life of
the TNI's RBS 70 man-portable air-defence missile systems.
PT Pindad has also signed an accord with Rheinmetall
Denel Munition (RDM) to jointly develop and produce
ammunition and provide support for the TNI's Leopard
tanks.
Sea
Given Indonesia's geography and strategic requirements, it
could be argued that its shipbuilding capabilities have not
developed to a satisfactory level. Efforts have been made to
enhance local capabilities, however. For example, in 2016
Indonesia established an agency dedicated to indigenous
warship design and development.
Indonesia has traditionally undertaken nearly all
shipbuilding programmes through state-owned PT PAL,
although in recent years some private sector shipyards in
the country are raising their profile. Like PTDI in the
aerospace sector, PT PAL has emerged as primarily a
licensed manufacturer of foreign developed platforms,
although some indigenous capabilities (with foreign
influence) are evident. In May 2011, for example, it
emerged that PT PAL had offered to meet a Philippines
amphibious vessel requirement with an indigenous design.
A similar design is also being offered to Myanmar.
PT PAL's only indigenously designed and developed
platforms to have entered service with the Indonesian Navy
over the past decade or so are small patrol vessels and
missile attack craft such as the KCR-60 class that were
commissioned in 2014.
Another shipbuilder PT Palindo Marine has produced
KCR-40 fast attack craft, which were commissioned in
© 2017 IHS
Defence industrial capabilities by domain
January 2017, and PT Karimun Anugrah Sejati launched two
PC-40 patrol vessels for the Indonesian Navy in late 2016.
In addition, in 2017 the TNI-AL inducted five newbuild KAL
28 patrol craft built by PT Tesco Indomaritim.
PT PAL is also preparing to construct under licence the
Indonesian Navy's third Chang Bogo-class diesel-electric
submarine. Prime contractor Daewoo Shipbuilding &
Marine Engineering (DSME) from South Korea is building
the first two submarines in South Korea with gradually
increased input from seconded PT PAL engineers and
technicians. Preparation also includes significant
investment in upgrading production facilities at the
company's shipyard in Surabaya, and this construction
programme was completed in early 2017.
Another indicator of efforts to develop capability is
investment to establish a warship design and development
centre. The Naval Design Centre was established in 2016 in
Surabaya.
The design centre is looking to develop capability through a
partnership with Danish company Odense Maritime
Technology (OMT), which was announced in 2017. It is
understood that the agreement covers potential
collaboration across a range of naval platforms.
To this end, the TNI-AL is known to have previously
expressed interest in the RDN’s Iver Huitfeldt-class frigate,
three of which were built by OMT and commissioned in
2012 and 2014. The TNI-AL is likely to be considering the
class as a replacement for its six Ahmad Yani-class frigates,
which are scheduled to be decommissioned from 2017.
C4ISR
The development of electronic systems related to rockets,
missiles, surveillance and detection is regarded as a priority
in Indonesia in order to enhance security across its vast
archipelago and enhance TNI integration.
As part of this drive Indonesia's PTDI, in collaboration with
the government-run Agency for Assessment and
Application of Technology (BPPT), is developing an
indigenous tactical surveillance Unmanned Aerial Vehicle
(UAV) – called Puna – although progress has been slow
partly due to limited experience and capability in this area.
Another UAV, named Wulung, has been developed by PTDI
and has been delivered to the air force.
In addition, Indonesia's communications and aerospace
sectors have been developing an indigenous radar
capability, although Jakarta's preference for foreign
39 July 2017
Navigating the Emerging Markets | Indonesia Defence industrial capabilities by domain

systems, such as ThalesRaytheonSystems's Master T system

(contracts relating to which were placed up to 2005),
suggests that these indigenous programmes are not at a
sophisticated stage.

Similarly Indonesia currently has no indigenous missile

defence system but has been developing a 122 mm rocket
launcher system – called the R-HAN 122 – for several years.
PT Pindad and PTDI are involved in developing the R-HAN
system, and it is possible that Chinese technologies could
be sought to boost the programme. Beijing and Jakarta
signed a missile agreement in 2011 that is based initially on
transfer of technologies related to C-802 anti-ship cruise
missiles but it is likely to be expanded to encompass the
C-705 surface-to-surface missile.

Cyber-security
Indonesia began in 2013 to bolster its national cyber-
security capabilities through the creation of a Cyber
Defence Operations Centre under the aegis of the Ministry
of Defence. National industrial capabilities in this area
remain rather lacking, however. To plug this shortfall,
Indonesia signed an agreement with Finland in January
2013 to co-operate on cyber security capability
developments. Assistance is also being provided by Japan
and the US.

© 2017 IHS 40 July 2017

Navigating the Emerging Markets | Indonesia
National defence companies by sector
Aerospace
PT Dirgantara Indonesia (PTDI)
Website: www.indonesian-aerospace.com
Capabilities: Provides military fixed-wing and helicopter
licensed production services to EADS and Bell Helicopters.
It also undertakes aerostructure work, a range of
engineering services and maintenance, repair and overhaul
of civil and military aircraft that it has produced.
Established: Established in 1976 as PT Industri Pesawat
Terbang Nurtanio (IPTN) by former president B J Habibie as
its president director. Became known as PT Dirgantara
Indonesia in 2000.
Ownership: State-owned
International partnerships: PT Dirgantara Indonesia has
a long-standing partnership with EADS subsidiaries Airbus
Military and Eurocopter to produce the NC-212 and CN-235
fixed-wing transport aircraft, and NBO-105 and NAS-332
Super Puma helicopters. PTDI also signed an agreement
with Textron subsidiary Bell Helicopter in 2009 to licence
produce the BEL 412 helicopter. PTDI has also discussed the
possibility of a partnership with the Aviation Industry
Corporation of China (AVIC) over joint production of
Chinese aircraft. PTDI was also the Indonesian lead on the
co-operative South Korean/Indonesian Korean Fighter
Xperiment/Indonesian Fighter Xperiment (KFX/IFX)
combat aircraft programme.
PT Goodrich Pindad Aeronautical Systems
Capabilities: Focused on actuation and landing systems for
primarily the commercial sector.
Established: 1997
Ownership: Goodrich holds 51% of the company; PT
Pindad 35%; and PT Metinca Dirgantara 14%.
International partnerships: PT Goodrich Pindad
Aeronautical Systems is a joint venture enterprise, formed
between Goodrich, PT Pindad and PT Metinca Dirgantara.
GMF AeroAsia
Website: www.gmf-aeroasia.co.id
Capabilities: Provides maintenance, repair and overhaul
services to primarily commercial airliners but also to some
military platforms such KDC-10 aerial refuelling tankers.
Also undertakes cargo conversion services, engine
maintenance and engineering services.
Established: GMF AeroAsia started in 1949 as the technical
division of Garuda Indonesia Airlines. Garuda Indonesia
transformed the division into the Garuda Maintenance
Facility Support Centre in 1984 to maximize contribution.
It split off from Garuda Indonesia in 2002.
Ownership: Privately owned
© 2017 IHS
International partnerships: Has long-standing
partnerships with many airlines and also the Indonesian
and Dutch defence ministries.
PT General Electric Nusantara Turbine Services
Capabilities: Provides repair and maintenance services for
combustion, turbine engines as well as components and
spare parts for GE engines and non-GE engines.
Established: 1955
Ownership: State/private ownership
International partnerships: The company is a long-
standing joint venture between PTDI and General Electric.
Naval services
PT Palindo
Website: www.palindoshipyard.com
Capabilities: Shipbuilding, design and repair. Specialises in
aluminium and glass-fibre structures. PT Palindo is
constructing the second of two fast attack craft (KCR-40)
for the Indonesian Navy.
Established: 1960
Ownership: Privately owned
International partnerships: Has previously partnered
South Korean shipbuilders Daewoo Shipbuilding and
Marine Engineering and Daesun Shipyard on the design of
four Makassar-class landing platform docks.
PT Dok Dan Perkapalan Surabaya
Website: www.dok-sby.co.id
Capabilities: Shipbuilding, Repair, Conversion, Design,
Engineering. Company specialises in building vessels of up
to 8,000 DWT.
Established: Formed by the Dutch in 1910 but handed over
the Indonesian government in 1961.
Ownership: State-owned
International partnerships: Signed an agreement with
South Korea's Daewoo Shipbuilding & Marine Engineering
in May 2011 to establish a joint venture to build a shipyard
in Batam, Indonesia.
PT SSE-Van Der Horst
Website: www.sse-vanderhorst.co.id
Capabilities: Precision engineering of shipbuilding
components. PT SSE-Van Der Horst Indonesia engages in
testing, repairing, servicing, and remanufacturing
equipment for the marine and ship repair sectors.
Established: 1991
Ownership: Privately owned
International partnerships: N/A
41 July 2017
Navigating the Emerging Markets | Indonesia
PT PAL Indonesia
Website: www.pal.co.id
Capabilities: PT PAL undertakes merchant/naval vessel
production, general engineering, nautical repair and
maintenance. The company is Indonesia’s most important
naval construction enterprise and in recent years has
secured partnerships with a wide range of foreign
companies.
Established: PT PAL was inaugurated by the Dutch
government in 1939. During Indonesia's Japanese
occupation during World War II the company's name was
changed to Kaigun SE 2124. Following independence in
1945, the Indonesian government nationalized the
company and changed its name back to PT PAL.
Ownership: State-owned
International partnerships: The company is currently
collaborating with Netherlands-based Damen Schelde Naval
Shipbuilding over the licensed production of 2,400-ton
frigates for the Indonesian Navy. Has also previously
collaborated with the China Precision Machinery Import-
Export Corporation – a subsidiary of the China Aerospace
Science and Technology Corporation – over the installment
of C-802 missiles on Indonesian naval vessels. PT PAL has
also entered a partnership with Indian shipbuilder Pipavav
to explore potential build programmes, and is partnered
with DSME of South Korea to carry out local construction
of the Indonesian Type 209 diesel-electric attack
submarines (a December 2011 accord).
PT Infra RCS
Website: infra-rcs.co.id/en
Capabilities: Company produces naval sensors
Established: N/A
Ownership: Private
International partnerships: N/A
PT Daya Radar Utama
Website: www.dayaru.com
Capabilities: Company is building landing ship tanks for
the Indonesian Navy
Established: 1960s
Ownership: Private
International partnerships: N/A
PT Citra Bahari Shipyard
Website: citrabahari.com
Capabilities: Company has built KCR-40-class anti-ship
missile craft and PC-43 patrol craft for the Indonesian Navy
Established: N/A
Ownership: Private
International partnerships: N/A
PT Tesco Indomaritim
Website: www.tescoindomaritim.com
Capabilities: The company is building nine fast attack craft
for the Indonesian Navy. All are scheduled for delivery by
© 2017 IHS
National defence companies by sector
the end of 2014. The vessel is known as the Kapal Motor
Cepat (KMC) Komando and was manufactured in
collaboration with the Navy and local tertiary institution
Surabaya Institute of Technology (Intstitut Teknologi
Surabaya).
Established: 1989
Ownership: Private
International partnerships: N/A
PT Lundin (North Sea Boats)
Website: www.northseaboats.com
Capabilities: The company is developing the Klewang-class
trimaran stealth patrol ship in collaboration with Saab. One
vessel is under constructed but a total of four are required.
The company also unveiled at IndoDefence in 2014 a range
of new vessels based on its wave-piercing catamaran and
trimaran hullform designs and carbon-fibre composite
technologies.
Established: 2003
Ownership: Private
International partnerships: Saab
Land
CV Sari Bahari
Website: www.saribahari.com
Capabilities: Produces small range of missiles, rockets and
bombs for the Indonesian Armed Forces. In November 2010
was contracted to produce P-100 and P-100L bombs for the
Su-27/30 aircraft in service with the Indonesian Air Force.
Established: 1993
Ownership: Privately owned
International partnerships: N/A
PT Pindad
Website: www.pindad.com
Capabilities: Company designs, develops and
manufactures armoured personnel carriers. It also produces
firearms, grenade launchers and ammunition. Service and
repair work is also carried out. PT Pindad developed the
Anoa APS-2 (6×6) APC for the Indonesian Army in 2003. A
contract was awarded for about 158 production vehicles in
three batches with over 120 units delivered by early 2011.
Established: Established in 1808 by Dutch but transferred
to the Indonesian government following independence in
1945.
Ownership: State-owned
International partnerships: Partnered with Turkey's
FNSS Savunma Sistemleri to develop a medium tank, and
has collaborated with Renault Trucks Defense over the
fitting of engines for Indonesia's indigenously
manufactured 6×6 Panser armoured personnel carrier. Has
also previously collaborated with the China Precision
Machinery Import-Export Corporation – a subsidiary of the
42 July 2017
Navigating the Emerging Markets | Indonesia
China Aerospace Science and Technology Corporation –
over the instalment of C-802 missiles on Indonesian naval
vessels. PT Pindad is also partnered with Belgium's CMI
Defence and Rheinmetall Denel Munition produce
weapons systems and ammunition respectively. In 2016 PT
Pindad also said that it was looking to secure its first
international acquisition within the ensuing 12 months.
PT Dahana
Website: www.dahana.com
Capabilities: Production of ammunition and explosives for
the Indonesian Armed Forces.
Established: 1966
Ownership: State-owned
International partnerships: PT Dahana signed
agreements with European companies Roxel and Eurenco
in May 2014 to develop and build a propellant plant in
Indonesia to meet the requirements of the Indonesian
Armed Forces.
Engineering services
PT Barata
Website: www.barata.co.id
Capabilities: Engineering and construction services
Established: 1971
Ownership: State-owned
International partnerships: N/A
Communications/high
technologies
PT Inti
Website: www.inti.co.id
Capabilities: Communications services
Established: 1975
Ownership: State-owned, but identified for privatisation
in 2012. Note that plans to merge PT Len and PT Inti were
raised by the Indonesian government in February 2013.
International partnerships: N/A
PT Len
Website: www.len.co.id
Capabilities: Development and manufacturing of a range
of electronic systems, including those related to
surveillance, combat management and tactical
communications. PT Len is involved in the research and
development of coastal surveillance systems in partnership
with the Indonesian Institute of Sciences and PT Dirgantara
Indonesia.
Established: 1965
Ownership: State-owned. Note that plans to merge PT Len
and PT Inti were raised by the Indonesian government in
February 2013.
© 2017 IHS
National defence companies by sector
International partnerships: PT Len formed a partnership
with Thales in 2008 related to the production of Thales
communications devices. Has also partnered South Korea's
Lig Nex1 to develop military communication systems.
PT Panorama Timur Jaya
Website: www.panorama.co.id
Capabilities: Development and manufacturing of avionics,
electronics and telecommunications systems. The company
also manufactures firearm sights. It produces a military
communications test system based on the Aeroflex TS-4317
communications test set (also known as the FM/AM-1600
test set).
Established: 1976
Ownership: Privately owned
International partnerships: Agreement with US company
Aeroflex to produce military communications systems.
PT Elektrindo Nusantara
Website: www.en.co.id
Capabilities: Company develops telecommunications
technologies and related equipment and systems. Company
is known to support other communications companies in
Indonesia in supplying services to the MoD.
Established: 1983
Ownership: Privately owned
International partnerships: N/A
PT Pasifik Satelit Nusanta
Website: www.psn.co.idra
Capabilities: Provides satellite telecommunications
services, notably to the Indonesian MoD.
Established: 1991
Ownership: Privately owned
International partnerships: Signed an agreement with
Lockheed Martin in 1995 to develop technologies related to
satellite technologies.
Elektrindodaya Pakarnusa PT
Website: www.nusaweb.com
Capabilities: Company activities encompass
telecommunications, defence electronics, navigation,
simulation/training, and civil aviation products.
Established: 1975
Ownership: Privately owned
International partnerships: N/A
PT Indosat
Website: www.indosat.com
Capabilities: Provides satellite telecommunications
services; notably radio-frequency systems.
Established: 1967
Ownership: Partly owned by government, partly
43 July 2017
Navigating the Emerging Markets | Indonesia National defence companies by sector

privatised.
International partnerships: Has previously been
partnered with satellite communications group Intelsat.

PT Telekom
Website: www.telkom.co.id
Capabilities: The provision of telecommunications
services.
Established: 1970
Ownership: State-owned
International partnerships: N/A

© 2017 IHS 44 July 2017

Navigating the Emerging Markets | Indonesia
Transparency and corruption
Transparency International Corruption Perceptions
Index rankings: Indonesia and regional peers (2016)
2016 Ranking (out of 176
territories)
Singapore 7 programmes that have been subject to scrutiny by
Malaysia 55
Indonesia 90
Philippines 101
Thailand 101
Vietnam 113
Source: Transparency International
Overview
Corruption and a lack of transparency have been problems
associated with Indonesia's governmental systems -
particularly in defence - for many decades and are largely a
result of a lack of controlled access to funds and diluted
civilian oversight of military budgets and other
administrative processes.
In the past such unregulated practices have led to a number
of defence procurements being subjected to illegal "price
markups". Jane’s understands that the problem has
continued under the current Joko Widodo administration.
Indonesia’s problems with corruption are reflected in the
Transparency International Corruption Perceptions Index
(CPI) reports. In the 2016 CPI Indonesia was ranked 90th
(out of 176 countries), maintaining its position as one of
the lowest placed countries in the region. Despite this, it
does represent an improvement on recent years, which can
attributed to continuing efforts in Jakarta to eradicate
corruption. In 2014 Indonesia was ranked 107th out of 174
countries and in 2013 was ranked 114th out of 175
countries. Its ranking in 2015 was 88th.
Procurement focus
The government's watchdog, the Komisi Pemberantasan
Korupsi (KPK), or the Corruption Eradication Commission,
is the lead agency in fighting graft in defence procurement.
Underlining both the historical scale of the problem and the
efforts to address it, the KPK is supported by another
agency – the Indonesia Corruption Watch – a non-
government organisation that has also been involved in
implementing processes to encourage transparency in
defence.
The KPK has stated that 70% of corruption activity in
Indonesia occurs in the procurement of goods and services.
Allegations of irregularities in defence procurement have
© 2017 IHS
been commonplace over the past decade. Indonesia's
purchases of Scorpion light tanks in the 1990s as well as Mil
Mi-2 and Mi-17 helicopters in 2002 and 2004 and Sukhoi
fighter aircraft in 2011 are examples of acquisition
Indonesian officials.
In 2017 the KPK also said there was suspected procurement
irregularities in the Indonesian export of strategic sealift
vessels to the Philippines.
Civilian oversight
Efforts to address corruption in defence and other sectors
have been highlighted by the government – and particularly
President Susilo Bambang Yudhoyono (in power from 2004
to 2014) – as a priority in its bid to raise levels of
professionalism and accountability as well as make more
efficient use of public funding. A similar priority has been
announced by Yudhoyono's successor Joko Widodo.
As part of an aim to centralise defence procurement, the
government has introduced a number of initiatives
designed to address corruption. These measures – which
include the need for defence minister approval on defence
programmes and the inclusion of integrity pacts – are
enshrined in defence procurement laws that have been
enacted since 2004 (see Procurement). This centralisation
is intended to increase civilian oversight of defence
procurement procedures and relegate the armed services to
a "request and consultation" role. It is also intended to
reduce the influence of so-called middlemen or those
involved in arranging and approving defence transactions.
Anti-corruption declaration
Indicative of the government's commitment to stamp out
corruption in defence - and perhaps an acknowledgement
that previous policies needed strengthening - in January
2011 the Ministry of Defence signed a "Declaration on Anti-
Corruption" with the chiefs of the three armed forces as
well as the KPK. Under the terms of the declaration, the
KPK was invited by then defence minister Purnomo
Yusgiantoro to monitor activities related to the
procurement of all goods and services.
The KPK – which was established in 2002 and has legal
basis to undertake independent investigations into
suspected corruption – is also calling on the MoD to
45 July 2017
Navigating the Emerging Markets | Indonesia Transparency and corruption

introduce e-procurement processes that encourage

accountability and transparency, although the MoD has so
far resisted such moves saying that defence has "unique
sensitivities".

Additionally, the MoD has introduced a range of

educational and training courses intended to install greater
levels of accountability and professionalism in defence
procurement. These measures are also intended to
complement the KPK accord signed in 2011.

These have been followed up with the MoD pledging to

adhere in April 2015 to an "integrity charter" to enhance
transparency and efficiencies within the ministry and the
TNI. The MoD said charter – a joint initiative between the
MoD and the Indonesian Ministry of Administrative and
Bureaucratic Reform – is intended to improve bureaucratic
processes within the MoD in relation to a range of
activities, including procurement.

According to an MoD statement, the overall intention is to

promote both the MoD and the TNI as "zones committed
towards integrity and anti-corruption". Indonesian Defence
Minister Ryamizard Ryacudu added that the initiative is
regarded as a "strategic step that will introduce bureaucratic
processes that are free from corruption".

© 2017 IHS 46 July 2017

Navigating the Emerging Markets | Indonesia
Relations with materiel producing countries
Indonesia has moved in recent years to enhance
government-to-government bilateral defence industrial
relations with a plethora of countries.
During 2012, accords were signed with the Czech Republic,
France, Germany, India, Italy, North Korea, Spain and the
UK. Comparable accords with Finland, Turkey, and Vietnam
were signed in 2013. In recent years, meanwhile, Indonesia
signed defence trade and industry agreements and related
military-technical accords with countries including Greece,
India, Sweden, Ukraine, Japan, Slovakia, Saudi Arabia,
Canada, and the Netherlands.
The specific nature of the agreements varied to a degree but
at their core was Indonesia's desire to accelerate defence
industrial development while broadening its potential pool
of suppliers. External suppliers, meanwhile, eyed
Indonesia's growing military procurement budgets and far-
reaching materiel and service requirements.
China
Summary of bilateral relations: Diplomatic relations
between Indonesia and China were restored in 1990 after
being suspended for 25 years after Jakarta accused Beijing
of supporting an abortive coup against the Indonesian
government. Since 1990 ties have improved rapidly,
although Indonesia remains wary of China's strategic
intentions in the Asia Pacific.
Bilateral trade (all): China is Indonesia's fourth biggest
trade partner with total transactions reaching nearly
USD130 billion during 2000 and 2009 (IMF). By the end of
2015 the two countries are aiming to grow bilateral trade to
more than USD80 billion. In 2014 and 2015 the value of
trade was about USD70 billion annually.
Defence trade history: Indonesia's purchase of Chinese
matériel has been minimal but has grown in recent years.
The only sales to date have all occurred in recent years: in
2009 Indonesia purchased QW-3 portable surface to air
missiles while in 2008 and 2010 it concluded deals to
procure C-802 anti-ship missiles. The latter of these
purchases was supplemented by a comprehensive
technology transfer agreement.
Defence teamings/joint ventures/live memoranda of
understanding: The two countries have created an inter-
governmental military technology forum that is intended
to explore areas of potential procurement. The partnership
facilitated China's sale in 2011 of C-802 missiles. Industry
partners on the C-802 programme are Indonesia's PT
Pindad and the China Precision Machinery Import-Export
Corporation (CPMIEC); a subsidiary of defence enterprise
the China Aerospace Science and Technology Corporation.
© 2017 IHS
In February 2014 bilateral co-operation was again on the
agenda, with military-to-military activities such as
maritime co-operation and anti-terrorism exercises
discussed.
Position of Indonesia in wider strategic plans: China
regards Indonesia as an important partner in Southeast
Asia. The significance of the relationship has been
highlighted by senior Chinese officials' numerous visits to
Jakarta in 2010 and 2011. Of note to China is Indonesia's
proximity to an area in the South China Sea that is thought
to contain extensive oil and gas reserves. China also wants
to gain more influence over the navigation of the fuel that
traverses through the Indonesian region to China from the
Middle East.
Prognosis for future defence trade: China aims to secure
considerable sales to Indonesia. Its strategy is largely based
on marketing inexpensive products coupled with transfer
of technology. Indonesia, however, seems reluctant to
engage to any significant degree mainly due to its
continuing wariness of Chinese strategic intentions.
France
Summary of bilateral relations: Bilateral relations
between Indonesia and France have grown considerably
stronger over the past five years with French politicians and
business leaders paying several high-profile visits to Jakarta
aimed at boosting links in a wide range of areas including
trade, defence, security, and science and technology. The
then president Susilo Bambang Yudhoyono also visited
Paris in December 2009 where the two countries signed a
strategic partnership agreement.
Bilateral trade (all): Bilateral trade between France and
Indonesia was relatively low between 2000 and 2009 at
around USD16 billion (IMF). In 2010 it increased to around
USD2.5 billion. Enhanced bilateral ties (as mentioned
above) are designed to boost trade significantly. In the short
to medium term the target is double annual trade to at least
USD5 billion.
Defence trade history: The Airbus Group has a licence
production partnership with PT Dirgantara Indonesia that
stretches back more than 30 years. PT Dirgantara has
produced Eurocopter NAS-332 Super Puma; EC- 120 and
NBO 105CB helicopters under license as well as Airbus
Military CN-1235 medium-range transport and C-212 short-
take-off-and-landing transport aircraft under licence. Also,
the two countries signed a strategic partnership in 2009
that is aimed to boost defence trade further. In 2014 and
2015 the two governments also discussed potential naval
shipbuilding programmes and an expansion of aerospace
industrial relations with focus on the C295 transport
aircraft.
47 July 2017
Navigating the Emerging Markets | Indonesia
Defence teamings/joint ventures/live memoranda of
understanding: The Airbus Group has a licence production
partnership with PT Dirgantara Indonesia that stretches
back more than 30 years. PT Dirgantara has produced
Eurocopter NAS-332 Super Puma; EC- 120 and NBO 105CB
helicopters under license as well as Airbus Military CN-1235
medium-range transport and C-212 short-take-off-and-
landing transport aircraft under licence. Also, the two
countries signed a strategic partnership in 2009 that is
aimed to boost defence trade further. In late 2014 the two
governments also discussed potential naval shipbuilding
programmes and in 2016 they initiated a project to promote
science and technology collaboration in strategic sectors
including defence.
Position of Indonesia in wider strategic plans: A
number of high-profile visits over the past few years
suggests France is viewing Indonesia as an important
trading partner in future years.
Prognosis for future defence trade: With strong
industrial links already in place - and strategic ties growing
– France is in a strong position to grow defence sales with
Indonesia.
Germany
Summary of bilateral relations: Although strained by
Germany's concerns over Indonesia's human rights record
in the late 1990s, the two countries have generally sound
diplomatic relations dating back to 1953. Ties were
strengthened substantially by German chancellor Angela
Merkel’s visit to Jakarta in 2012, during which a declaration
to enhance defence industrial co-operation was signed.
Indonesia’s then President Yudhoyono visited Berlin in
2013.
Bilateral trade (all): Germany is Indonesia's strongest
trade partner in Europe with bilateral trade reaching more
than USD35 billion from 2000 until 2009 (IMF). Bilateral
trade in 2011 stood at USD7 billion and in 2013 it reached
around USD8 billion. However, by 2015 the value of trade
had dropped to around USD6 billion, according to the
Germany government.
Defence trade history: In the past decade defence sales
have featured naval diesel engines and patrol craft (Cakra
Type 209 diesel electric submarines and PB-57 patrol craft -
two of each). In August 2012 Indonesia formally requested
the sale of Leopard 2 main battle tanks. An export license
was issued in 2013 for 164 armoured vehicles, composed of
Leopard 2A6 MBTs; 50 Marder 1A2 IFVs; four recover and
three bridge laying variants.
Defence teamings/joint ventures/live memoranda of
understanding: A declaration to enhance defence and
security co-operation was signed by Germany and Indonesia
in 2012 during German chancellor Angela Merkel’s visit to
Jakarta in July that year. The accord related to defence
research, development and production plus logistics,
disaster relief, training, exchanges, and peacekeeping.
© 2017 IHS
Relations with materiel producing countries
Indonesia has also expressed interest in collaboration with
Germany focused on naval shipbuilding.
Position of Indonesia in wider strategic plans: Germany
sees Indonesia as an important partner both on a bilateral
level and with regard to its relations with Asia Pacific and
Southeast Asian region. Indonesia embarked upon efforts
to undertake a series of reforms related to human rights
(from 2000), relations have warmed considerably.
Prognosis for future defence trade: Germany's
penetration of Indonesia's defence market is likely to
continue to grow in the future, being underpinned by
strong diplomatic engagement.
Japan
Summary of bilateral relations: Indonesia and Japan have
strong diplomatic relations based primarily on trade.
However, China’s increasing assertiveness in the Asia-
Pacific region has prompted the emergence of deeper
strategic ties between the two countries, which could lead
to defence trade following Japan’s easing of military export
restrictions in April 2014.
Bilateral trade (all): Japan is one of Indonesia’s strongest
trade partners. In 2014 and 2015 the value of this trade was
about USD45 billion annually and is expected to increase
significantly in the next decade along with Indonesia’s
economic expansion.
Defence trade history: Due to Japan's historic arms export
ban there has been no defence trade between the two
countries. However, in 2015 Japan and Indonesia signed
agreements to explore potential Japanese sales to
Indonesia. Jakarta has also expressed interest in acquiring
Japan's ShinMaywa Industries US-2 amphibious, fixed-wing
aircraft for search-and-rescue operations. A delegation from
Tokyo officially offered Indonesia the US-2 in August 2016.
There are also opportunities for Japanese sales of
technologies and systems related to early-warning
detection, surveillance, navigation, communication, and
minesweeping. Cyber defence is another area of potential
collaboration, with Japan’s NEC Corporation establishing a
cyber presence in the market in late 2015.
Defence teamings/joint ventures/live memoranda of
understanding: No industrial teamings exist although at a
government level the two countries have signed
exploratory agreements geared towards trade.
Position of Indonesia in wider strategic plans: Given
the rise of China, Japan sees Indonesia as a crucial security
partner in the region. Defence sales are regarded in Tokyo
as a means to gain influence in Indonesia.
Prognosis for future defence trade: Japan regards
Indonesia as a potential customer of ShinMaywa Industries’
US-2 amphibious search and rescue (SAR) aircraft and in
2016 discussions about the procurement were continuing.
Apart from this, there is also potential in sales of lower-key
items such as mission systems and radars.
48 July 2017
Navigating the Emerging Markets | Indonesia
Israel
Summary of bilateral relations: Indonesia does not
recognise Israel as a state and consequently the two
countries maintain no formal diplomatic ties.
Bilateral trade (all): Despite the lack of diplomatic ties, an
Israel-Indonesia Chamber of Commerce was founded in
2009 in an effort to boost trade. Israeli company FTS
(Formula Telecom Solutions) has penetrated the
Indonesian telecommunications market through a
partnership with PT Sampoerna Telekomunikasi Indonesia
(STI).
Defence trade history: Surprisingly, given the lack of
diplomatic ties, defence trade has occurred between
Indonesia and Israel, although not recently. In the early
1980s Indonesia took delivery of around 16 A-4E Skyhawk
aircraft. The deal was brokered by the US. Additionally,
Indonesia has expressed interest in the past in procuring
Israeli-made UAVs, which would likely be sold through
intermediaries in the Philippines.
Defence teamings/joint ventures/live memoranda of
understanding: N/A
Position of Indonesia in wider strategic plans: N/A
Prognosis for future defence trade: Any new defence
trade is unlikely, although not impossible, given the lack of
relations between the two countries.
Netherlands
Summary of bilateral relations: Indonesia and the
Netherlands have a long history that dates back to 1600s
when the Dutch East India Company commenced
operations in Indonesia. Indonesia was a Dutch colony from
the early 1880s until its independence after the Second
World War. Cultural ties are no longer strong between the
countries although trade and defence links are relatively
well developed.
Bilateral trade (all): Between 2000 and 2009 bilateral
trade between Indonesia and the Netherlands had reached
USD27 billion, according to the IMF. In the 20th meeting of
the two countries Joint Commission on Bilateral Economic
Cooperation in March 2010 the two countries agreed
efforts to increase trade and investment. In recent years the
value of annual bilateral trade has been about USD3 billion.
Defence trade history: Bilateral defence trade over the
past decade has been focused on sales of fire-control radars
and Sigma-class corvettes. The former was worth around
USD42 million while the latter was valued at
USD340 million.
Defence teamings/joint ventures/live memoranda of
understanding: Under the Sigma-class corvette sale
Damen Naval Shipbuilding Systems and PT PAL have
entered an agreement that sees the Netherlands-based
company transferring technologies to enable production to
take place locally. A bilateral defence industrial
collaboration accord was signed by the country’s defence
ministers in February 2014. It covered defence production;
© 2017 IHS
Relations with materiel producing countries
maintenance and logistics support; information exchanges;
science and technological activities; and technical training.
Position of Indonesia in wider strategic plans: The
Netherlands implemented in 2009 a policy to strengthen
bilateral trade with Indonesia. The policy is aimed at
improving democracy; corporate governance;
environmental and climate policy implementation; and
broad-based bilateral relations between the two countries.
Indonesia is also a recipient of Dutch aid although not in
the defence sector.
Prognosis for future defence trade: Given recent defence
sales, there is relatively strong chance of future sales of
naval platforms in particular.
Russia
Summary of bilateral relations: Russian ties with
Indonesia are well developed, having been formally
established 60 years ago. Both countries are members of the
Asia Pacific Economic Co-operation forum. These links have
led to strong defence links but overall trade between the
two countries is notably weak.
Bilateral trade (all): Bilateral trade between Indonesia and
Russia reached just USD5.7 billion during 2000 and 2009
(IMF). In events to mark the 60th anniversary of
diplomatic ties in September 2010 the two countries agreed
to try to increase bilateral trade to around USD5 billion in
the short to medium term from less than USD1 billion in
2009. In 2012 and 2013 the value of bilateral trade was
USD3 billion and USD3.4 billion. In 2014 the value of trade
dipped to USD2.5 billion, although the two countries
pledged to introduce measures to boost this to USD5 billion
by 2016.
Defence trade history: Relations between Indonesia and
Russia have primarily been centred around military sales.
During the embargo on military equipment imposed on
Indonesia, Jakarta turned to Russia for several significant
arms purchases, including fighters aircraft and helicopters.
In 2007 Russia offered Indonesia a USD1 billion loan for
military purchases. The relationship was strained, by what
Indonesia saw as a lack of technological support for Russian
matériel: a fear apparently assuaged by a defence co-
operation MoU signed by the countries in 2011. In 2014 and
early 2015 the two countries made notable attempts to
deepen their defence technological links with a view to
boosting trade. In a notable exchange in early 2015 Russia
stated that it is "ready to go ahead" and commence defence
offset schemes to support a range of Russian military
platforms. These include the Sukhoi Su-35 fighter aircraft
and Kilo-class (Project 636) submarines, both of which
Russia is promoting to meet emerging requirements in
Indonesia.
Defence teamings/joint ventures/live memoranda of
understanding: The two countries signed a military
technical co-operation agreement in 2006, which has led to
Russian engineers and designers providing assistance to
49 July 2017
Navigating the Emerging Markets | Indonesia
Indonesian naval shipbuilding programmes and its Sukhoi
fighters. Relations were enhanced further in 2013 with the
signing of an additional agreement on defence industry
collaboration and funding. The latter agreement was signed
in January 2013 during the eight session of the Indonesian-
Russian Commission on Military Technical Co-Operation
(held in Jakarta). It is also notable that Russia made a
formal offer to expand military-technical co-operation to
Widodo, just one day after he was inaugurated as president
on 20 October 2014.
Position of Indonesia in wider strategic plans: In 2006
and 2007 relations between the two countries improved
with state visits to respective capital cities from both sets
of leaders. The visits were intended to mark a new level of
partnership between the countries. Despite this, there is
recognition that the partnership needs to be accelerated
through more frequent dialogue and exchange of visits
between cabinet members and business leaders.
Prognosis for future defence trade: Given Russia's
position as trusted supplier and its willingness to offer
Indonesia credit on military purchases, Jakarta is likely to
remain a major procurer of Russian equipment in the short
to medium term, particularly platforms such as helicopters,
fighter aircraft and perhaps submarines.
Singapore
Summary of bilateral relations: Ties between Indonesia
and Singapore have traditionally been somewhat tense, and
periods of improved relations have traditionally been based
more on personal relationships between leaders than
institutional grounds. Since the end of the 20th century
ties have generally been strained although Indonesia's
President Yudhoyono's administration (2004 to 2014)
worked more closely with its Singaporean counterparts and
relations are slowly improving.
Bilateral trade (all): In 2015 bilateral trade between
Singapore and Indonesia reached more than USD44 billion.
Defence trade history: Only one defence deal of note has
been announced in the past decade: a USD50 million
contract that calls for Singapore Technologies Engineering
to modify four C-130B Hercules transport aircraft for the
Indonesian Air Force. The contract was signed in 2008.
Defence teamings/joint ventures/live memoranda of
understanding: The two countries have agreements over
military training and exercises although none exist for
industrial collaboration. Singapore Technologies
Engineering (ST Engineering) has previously collaborated
with PT Pindad over the Indonesian company's licenced
production of artillery and firearms.
Position of Indonesia in wider strategic plans:
Singapore regards Indonesia carefully, vigilant for any
nuance or change in tone that may signal a shift in Jakarta's
historically unpredictable attitude towards its neighbour.
© 2017 IHS
Relations with materiel producing countries
Prognosis for future defence trade: History suggests
major defence trade between the two countries is unlikely
although deals related to firearms or maintenance are a
possibility.
South Korea
Summary of bilateral relations: Relations between
Indonesia and South Korea have developed rapidly since the
signing of a strategic partnership between the two
countries in December 2006. The bilateral relationship has
expanded beyond traditional areas of trade and investment
co-operation and now includes security and defence
collaboration.
Bilateral trade (all): South Korea is Indonesia's fifth
biggest trade partner. Between 2000 and 2009 trade
reached more than USD90 billion (IMF). However, trade in
expanding. In 2010, for example, bilateral trade reached
USD20 billion, an increase of 57% over trade in 2009. Trade
reached USD22 billion in 2013, although the two countries
are targeted trade worth USD100 billion by 2020.
Defence trade history: Defence deals between the two
countries have increased significantly in recent years.
According to Jane’s statistics, South Korea was Indonesia’s
second largest defence trade partner between 2009 and
2013. The first defence deal of note between the two
countries was secured in 1997 when Indonesia acquired
KT-1 Woong-Bee trainers in exchange for eight CN-235s.
Since then Indonesia has gone on to procure from South
Korea landing platform dock ships, military vehicles,
submarines and advanced trainer jets as well as supply
upgrade services for its submarines. The two countries are
also co-developing a fighter aircraft platform (The Korean
Fighter Xperiment/Indonesia Fighter Xperiment).
Defence teamings/joint ventures/live memoranda of
understanding: Several defence agreements exist between
the two countries that explore areas of collaboration. As
part of these agreements Korea Aerospace Industries has a
close partnership with PT Dirgantara, which is geared
towards supporting the development of Korea’s KFX
fighter aircraft. PT PAL has also secured a close partnership
with DSME, which is focused on submarine construction.
Position of Indonesia in wider strategic plans: As part of
a government campaign to boost international sales of
defence equipment, South Korea regards Indonesia - and
the whole of Southeast Asia - as a key export market over
the next decade and beyond.
Prognosis for future defence trade: Indonesia and South
Korea are frequently engaged in defence dialogue, most of
it aimed at potential collaboration. Defence trade is likely to
remain strong, particularly as South Korea appears willing
to transfer technologies to Indonesian defence companies.
UK
Summary of bilateral relations: Relations between the
UK and Indonesia are relatively strong at present despite
50 July 2017
Navigating the Emerging Markets | Indonesia
the UK's military embargo from 1999 to 2000. A defence
co-operation accord was signed by Indonesia and the UK in
2012. Former UK prime minister Tony Blair’s visit to Jakarta
in March 2006 for talks with the then president Susilo
Bambang Yudhoyono was the first by a UK prime minister
for more than 20 years. Current prime minister David
Cameron visited Jakarta in 2012.
Bilateral trade (all): Bilateral trade between the UK and
Indonesia is relatively strong. Between 2000 and 2009
bilateral trade reached USD20.5 billion (IMF) and in 2010 it
stood at USD2.63 billion, with Indonesian exports
increasing 16% to USD1.69 billion and imported products
and services from the UK up 11% to USD937.86 million. In
2012 the UK and Indonesia agreed to double bilateral trade
from GBP2.2 billion (USD3.5 billion) in 2010 to
GBP4.4 billion in 2015.
Defence trade history: Through BAE Systems, the UK
enjoyed strong sales to Indonesia in the 1990s (including
Hawk trainers, light tanks, assault vehicles, armoured
personnel carriers), although this trade virtually dried up.
Indonesia is on the radar of UK defence and security
exporters. BAE systems sold a BAE 146 regional jetliner to
Indonesia in 2009. BAE Systems created an Indonesian
subsidiary in 2012 as a bridge-head into the market, with an
emphasis on the sale of support services relating to existing
MK 209/MK 109 Hawk aircraft.
Defence teamings/joint ventures/live memoranda of
understanding: The UK and Indonesia signed a bilateral
defence co-operation accord in 2012; a memorandum of
understanding inked by secretary of state for defence Philip
Hammond and his counterpart in November 2012.
Position of Indonesia in wider strategic plans: Despite a
lack of recent defence contracts, Indonesia is one of UK
Trade & Investment's 17 high-growth markets and trade
relations between the UK and Indonesia remain reasonably
healthy. Ties through religion - such as the Indonesian-UK
Islamic Advisory Group - also contribute to positive
relations between the countries.
Prognosis for future defence trade: Defence trade links
between Indonesia and the UK have recovered from the
military embargo imposed on Indonesia for a relatively
short period in 1999-2000. The potential for future
transactions is positive.
US
Summary of bilateral relations: Relations between the
US and Indonesia have become strong since the election of
President Susilo Bambang Yudhoyono in October 2004 and
even stronger since the election in 2008 of President
Barack Obama, who himself is sentimentally attached to
Indonesia after spending part of his childhood there. A key
partnership agreement between the two countries was
signed during Obama's visit to Jakarta in November 2010,
which is designed to frame US-Indonesia bilateral relations
for the next decade. An area of friction between the two
© 2017 IHS
Relations with materiel producing countries
countries remains Indonesia's human rights record; an issue
that was the cause of US military sanctions on Indonesia
through the late 1990s until 2005.
Bilateral trade (all): In 2014 the value of bilateral trade
between the US and Indonesia was USD27.6 billion and in
2015 this dropped slightly to USD26.7 billion, according to
the US government. The value of trade is heavily in favour
of US imports.
Defence trade history: Before military sanctions from the
late 1990s until 2005 defence trade was relatively strong. It
has taken several years since the end of those sanctions,
however, for trade to pick up again. The US Embassy in
Indonesia told Jane's in 2010 that it was processing about
USD200 million worth of defence trade requests from
Indonesia. It also said it wants to offer Indonesia a
"complete capability package" as Indonesia seeks to
modernise. The congressional notification in November
2011 of the sale of two squadrons (24) surplus F-16C/D
fighter aircraft was an encouraging development. In 2013
Indonesia ordered eight new-build Boeing AH-64E Apache
attack helicopters, with deliveries scheduled to commence
from 2016. There is also a possibility for trade based around
the Boeing Chinook heavy-lift helicopter. Indonesia is
expected to order the Chinooks in 2016.
Defence teamings/joint ventures/live memoranda of
understanding: During then US Defense Secretary Robert
Gates' visit to Jakarta in July 2006 he moved normalise
military ties with Indonesia by resuming joint activities
with Indonesia's Special Force Command (Kopassus).
However, defence industrial collaboration between the two
countries since this was accord was signed has been limited.
But in May 2015 Indonesia and the US agreed to expand
collaboration in defence technologies. Areas of
technological collaboration are likely to focus on
Indonesia's procurement of 24 refurbished ex-US Air Force
Lockheed Martin F-16C/D fighter aircraft and eight new
Boeing AH-64E Apache attack helicopters. The agreement
is seen to address a concern in Jakarta that Indonesia’s
access to US technologies (in order to undertake platform
support) has been limited particularly in relation to F-16
fighter aircraft.
Position of Indonesia in wider strategic plans: The US
views Indonesia as an important partner for a range of
reasons including: religion; location; energy; security; and
trade. The significance of the relationship was indicated by
then Defense Secretary Robert Gates and President
Obama's visits to Jakarta in July and November 2010
respectively. Washington’s strategic shift in emphasis from
the Middle East to the Asia Pacific region points to greater
emphasis yet.
Prognosis for future defence trade: Strategically,
Indonesia welcomes the US's presence in Southeast Asia as
a balance against China. In addition, Jakarta has indicated
that it would favour purchases of US matériel, although a
51 July 2017
Navigating the Emerging Markets | Indonesia Relations with materiel producing countries

major stumbling block is likely to be affordability.

© 2017 IHS 52 July 2017

Navigating the Emerging Markets | Indonesia

Credits
Report authors
Guy Anderson – Senior Principal Analyst - A&D (Jane's)
Jon Grevatt – Jane's Defence Industry Analyst (Asia Pacific)

E-mail: guy.anderson@ihs.com

Analytical team:
Andrew MacDonald – Jane's Senior Defence Industry
Analyst
Charles Forrester – Jane's Senior Defence Industry Analyst

Thanks to:
Guy Eastman – Senior Analyst, Jane’s Defence Budgets
Fenella McGerty – Principal Analyst, Jane’s Defence Budgets
Craig Caffrey – Principal Analyst, Jane’s Defence Budgets

Jane's Military Capabilities desk:

Dylan Lee Lehrke - Senior Analyst, Military Capabilities
Konrad Muzyka - Analyst, Military Capabilities
Caron Tauro - Analyst, Military Capabilities
Reed Foster - Senior Analyst, Military Capabilities
Rukmani Gupta - Senior Analyst, Military Capabilities
Ana-Roxana Popescu - Analyst, Military Capabilities

Design and production

Jonathan Maynard – Chief Sub Editor
Sam Reynolds – Senior Copy Editor
Ria Chantler – Design

Style and automation

Andrew Ruffle – Stylist and PDF creation
Eddy Lee – Programmer

© 2017 IHS 53 July 2017

Navigating the Emerging Markets | Indonesia
About
About Jane's Defence Industry and
Markets Intelligence Centre
Jane's Defence Industry and Markets Intelligence Centre
improves the effectiveness of your decision-making by
providing you with critical market intelligence on your
competitors and their capabilities, current and future
market opportunities, country capabilities, potential
requirements and future trends.
www.ihs.com/jdim
About Jane's DS Forecast
Jane's DS Forecast is the leading Aerospace & Defence
industry market forecasting resource, providing accurate
and reliable 10-year forecasts across more than 20 global
markets.
www.ihs.com/jdsf
About Jane's Defence Budgets
Jane's Defence Budgets is the industry leading resource
delivering a five-year forecast of global defence budgets
© 2017 IHS
with three years of historic data and analysis of the factors
impacting budget trends, saving research time and effort
while allowing you to make better, informed decisions.
www.ihs.com/jdb
About Jane's Defence Sector Budgets
Jane's Defence Sector Budgets is the exclusive market
intelligence solution offering a comprehensive, top-down
view of budget data by market and by budget type,
including a ten-year forecast of global defence application
budgets and one year of historical data.
www.ihs.com/jdsb
About Jane's Defence Procurement
Jane's Defence Procurement provides complete program-
level procurement and upgrade data with daily updates and
20-year forecasts allowing you to quickly recognize market
growth opportunities and track current country
capabilities.
www.ihs.com/jdp
54 July 2017