Indonesia Defence and Security Report Q1 2013

BMI’s Indonesia Defence & Security Report for Q1 2013 examines the country’s strategic position in theSouth East Asian region and the wider world. It provides an overview of the contemporary geopoliticalchallenges facing the country, and the challenges it may face in the future.

The report examines the trends occurring in the country’s current and future defence procurement, and theorder of battle across its armed forces. The report’s general conclusion is that after many years ofstrategic isolation, Indonesia is emerging as an important player in the Asia Pacific region. In keepingwith this development, the Indonesian military, after years of underinvestment and foreign vilificationover its activities in East Timor, is starting to reap the rewards of an increasing defence budget and also ofthe country’s improving international reputation.

First, this means that the Indonesian armed forces are beginning to procure advanced new equipment toreplace an inventory that is generally nearing obsolescence. New materiel on order includes ApacheLongbow attack helicopters from the United States, Sukhoi fighters from Russian, light combat aircraftfrom Brazil, tactical transport planes from Spain, and advanced trainer aircraft and diesel-electricsubmarines from South Korea. A fast-growing defence budget has, of course, enabled these acquisitions.

Secondly, thanks to its much-improved international reputation, Jakarta is now in a position to obtainused military equipment on relatively favourable terms. Among the second-hand items that Indonesia hasacquired relatively cheaply are armoured vehicles, including main battle tanks, from Germany, F-16fighters from the US, and C-130 transport aircraft from Australia.

Thirdly, Indonesia is beginning to revamp its underperforming domestic defence industry, with a view toachieving self-reliance in key equipment areas in the future. In Asia, key defence industry partners nowinclude China, India and South Korea, while further afield Australia and the UK have recently signeddeals with Jakarta aimed at assisting the development of local industry while boosting market access forBritish and Australian companies.

The only serious clouds on the horizon for Indonesia are domestic. The government is sticking with itsmilitary-led policy in the restless province of Papua, despite clear signs that such a policy cannot succeed.A new security bill proposed by the government has produced a political backlash in Jakarta on thegrounds that it is too heavy-handed and could undo much of the progress made so far by the democraticreform process.

Over the last quarter BMI has revised the following forecasts/views:

The situation in Papua is updated. While violence there has continued, the Indonesian House ofRepresentatives earned few plaudits internationally by stating its view that the military should beallowed to do what it takes to keep the province under control. This is despite independentevidence of military abuses in the region, and the likelihood that such activities have in factencouraged the separatist insurgency.

Indonesia’s latest military procurements are discussed in detail. Arguably the most significantdevelopment in Q3 was the confirmation that Jakarta is to acquire eight Boeing AH-64D ApacheLongbow attack helicopters from the US. The Indonesian government had previously been waryof buying new equipment from Washington, wishing to retain its strategic independence.However, it clearly now regards the US as an acceptable partner. Jakarta’s success in attracting awide range of other new partners willing to share world-class technology means that Indonesiacan now safely do business with the US, without ever becoming over-reliant on US kit.

Efforts to revitalise the country’s defence industry gathered pace in early Q4, with the country’sparliament passing a long-awaited Defence Industry Bill. The new law requires that the MoDpurchase materiel from domestic companies wherever possible. It also sets out the country’s firstformal offset rules, requiring foreign suppliers to partner with local firms when fulfilling defencecontracts. The bill is expected to be signed into law by the end of the year.