Understanding current Indonesian gov situation related to its KFX/IFX payment issues.
Written by Indos
1. Prabowo wants to get elected, so he wants to be seen as successful defense minister, so his buying spree action is seen to make him win public support, despite maybe he doesnt know that if he doesnt finance KF21 properly then he will get public backlash and this will haunt him in the upcoming Presidential debate as he is seen as prioritizing importing foreign plane than Korean-Indonesian joint fighter program which is a national program amid limited defense ministry budget.
2. Prabowo is Jokowi rival in 2019 election, bringing Prabowo to the cabinet will strenghten Jokowi position in parliament related to Omnibus Law, Nusantara Capital City, and reducing fuel subsidy which are very important Jokowi program. So Jokowi will not intervene much on how Prabowo manage its own budget.
3. KFX/IFX program is Defense Minister program and should be paid by Defense Ministry budget, this is what is understood by the cabinet members. Jokowi first administration can pay the program normally for 2015, 2016, and 2019 payment where the defense budget is actually not really different with current defense budget. What is obvious is that within Jokowi first administration they dont order much imported equipment.
4. Indonesian administration is very economic centric since Soeharto period (1967 above). Economy become their main drive and goal. Indonesian administration during Jokowi period is even more economic centric, they dont even order much foreign equipment before Prabowo become Defense Minister in Jokowi second term.
5. Indonesian Defense Ministry buying spree on various foreign defense equipment lately is financed by long term foreign loan, not fresh cash money.
6. Any R&D program with total cost above 500 million USD is expected to be difficult to be financed properly due to so many pressing needs as developing country with GDP per capita at 4500 USD (2022). The financing constrain is also likely to happen due to our law that limits gov budget deficit maximum at 3% of GDP which has already been applied since early 2000's after the country gets hurt by Asian Financial Crisis (1997-1998)
R&D program is not put as very important by many Indonesian administrations, they do have R&D program but not really that enough, for example current administration cannot fund R80 civilian plane program despite it is 100 % Indonesian project and can bring pride to the nation with sound business logic due to Indonesian archipelago characteristic and its huge population and growing economy. R80 program only needs around 1 billion USD financing for development until it gets type certificate but this administration cannot finance it due to various pressing issues. For information, currently the plane basic design has already been completed.
If R&D program total cost is less than 300 million USD than current gov will likely support it fully as it is still reasonable for them, while KF21/IFX program needs Indonesia to spend at 1.3 billion USD which is likely considered as too expensive by current gov economists. So the delay in the payment should be expected to happen, but Indonesia is very very unlikely to abandon its financial commitment on the program.
This is why development program like HSR train, medium tank, rockets, N219, N219 Amphibious, and MALE UCAV can get sufficient gov financial support. MALE UCAV program is also not stopped but currently is working on the mission system development.
Indonesian Indigenous HSR train development
7. Jokowi Nusantara project needs to be speed up as he is about to finish the job in November 2024, he still can finance the project until 2025 as 2025 gov budget is still set during his term in July/August 2024. Nusantara project is Jokowi own baby, while KFX/IFX program is a program that is initiated by Susilo Bambang Yudhoyono administration since 2009 (currently serve as opposition to Jokowi administration in parliament) when South Korea asked Indonesia to join the program.
So, what is next to expect?
Nevertheless, I believe any Indonesian administration will support the program. The program has already reached the phase where it will be very damaging politically for Indonesian gov to get out from the project. Current government start paying the development cost again after renegotiation is completed in 2021 November, it is despite the amount is not really large, but they have started paying it. What Prabowo means on recent conversation with Indonesian journalist when he said that he still negotiate with Korea while he also said that Indonesia will commit on its obligation is more related with the payment schedule.
Next administration of course will get the highest burden related to the financing, despite so next administration will likely inherit larger GDP, larger gov revenue, and much healthy economic conditions.
Next administration will also the one that will likely get the most credit if they fully support the program since the first plane being manufactured in Indonesia will likely be roll out during their period. They also will not have the same urge as current gov to complete Nusantara city project as soon as possible and will likely see it as long term plan thus will likely be more relax compared to current gov regarding to Nusantara city development.
Next administration, in my opinion, will likely have more seriousness in building defense technology due to the nation ambition will likely be raised starting in 2025. Extreme poverty is also expected to be successfully eliminated next year during the last year of Jokowi administration. This then will give more budget space for gov R&D programs.
The Indonesian economists also have already realized the importance of home ground technology development and current gov also has already completed making Indonesia long term development plan last month (2025-2045) where home grown technology development is seen as a very important aspect of development for the country to reach developed status in 2045, so I predict the next administration will likely disburse much larger financing for any important R&D program compared to current one, could be much bigger than people may currently think.
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