Future of the defense industry under a new leader
Muhamad Haripin, Jakarta | Opinion | Thu, July 17 2014, 10:23 AM
While waiting for the result of the presidential election, it is time to consider exactly how the sweet promises made throughout the campaign period can be realized.
Since both presidential candidates brought up the national defense industry during the debate on security and foreign policy, the question is: How exactly will the new government reinvigorate the industry?
Surely, Prabowo Subianto and Joko “Jokowi” Widodo have some sort of idea on how they would achieve their goals.
However, here are several points they can consider once one of them finally takes office.
Outgoing President Susilo Bambang Yudhoyono and his Cabinet more or less have set up the grand strategy for defense industry development. It was during Yudhoyono’s tenure that Indonesia finally created a new regulation on the defense industry (Law No. 16/2012) and special committee to deal with the issue.
The new president could continue, revise or even accelerate the effort. Within that context, the period of 2015-2019 signifies a new dawn for the Indonesian defense industry in the post-New Order era.
According to a strategic plan developed by the Defense Industry Policy Committee (KKIP), which is headed by the President, the period of 2015-2019 is the second phase and has three objectives.
First, national defense industries have the capability of supporting the fulfillment of minimum essential force, enhancing joint-production with foreign suppliers and developing new weaponry.
In essence, in the second phase, Indonesia aims to control the production of defense-related instruments.
Therefore, in the future, the proportion of national production in national force could exceed foreign suppliers or arms imports.
Previously, in the first phase (2010-2014), the objectives were to revitalize national defense industries, arrange a long-term program and prepare national regulation. The focus of the first phase was to obtain the knowledge, skill and infrastructure of design control.
Looking at the KKIP plan, we can see how grandeur the project is. Carrying out the plan will not be easy, but not impossible. Indonesia needs to think outside the box and dare to take risks.
First, the new president should increase the national Research and Development budget. The current budget, which is still below 1 percent of the GDP, is barely enough to fulfill and sustain Indonesia’s needs.
An increase of the R&D budget must be followed by the implementation of systematic policy to foster an innovative and efficient culture in the defense and commercial sector, as well as in research conducted by universities and research institutes such as the Indonesian Institute of Sciences (LIPI).
Innovation and efficiency are valuable currencies in the world nowadays. Whichever power produces the most innovative and efficient products or service will control and even dominate the market.
Second, to be relevant domestically and competitive internationally, Indonesian defense industries should be arranged into clusters classified based on core competencies.
The KKIP must coordinate and lead the course of development and ensure that no resources are being wasted because of inefficiency, corruption or miscalculation. Defense industries must be professionally managed.
Innovation, efficiency and industrial clusters have a multiplier effect on the whole defense system.
In effect, it would bolster not only the productivity of industries but moreover the capability of the defense system to protect national integrity.
Within the defense industry, the government basically plays the roles of customer, sponsor as well as regulator (Heidenkamp, Louth, Taylor, 2013) — roles that present both opportunities and challenges.
Defense companies provide the needs of national armed forces and government pays for its products or services.
To meet specific requirements, it is not unusual for companies to customize the line production and investing for more sophisticated means of production.
Meanwhile, government also holds prominent roles in this relation. One of them is maintaining the productivity of the national industries through export promotion abroad. Moreover, the government’s support for defense industries is also reflected in R&D financing.
However, as regulator, government must make sure that the defense industry, be it the state-owned enterprise or private entity, complies with national law and international norms, such as the Corruption Law.
Corruption remains a major problem in Indonesia. In a matter of national importance, the government should think beyond 10 or 20 years of planning.
What the policymakers should bear in mind is that Indonesia should emerge as a prominent player in the region. It would not only bring stability and prosperity in the domestic sphere but also benefits in the context of regional and international order.
In 2020-2024, Indonesia will enter the third phase. More ambitious than previous phases, the goal is to obtain the technological and managerial capabilities for new development.
In that future phase, Indonesia shall have already established its position within the first tier of global hierarchical defense producers. PT DI, PT Pindad and PT PAL, for example, offer innovative products with cutting-edge technologies for world consumption.
National defense industries support the Indonesian armed forces and Indonesia is involved in much international cooperation.
Having said all the above, the development of national defense industries needs strong political will from the government, and continued public participation and approval, as others states have shown so far.
Therefore, it is imperative that within the first few days of taking office, the new president should set the stage for the reinforcement and improvement of the defense industry plan in a professional and democratic way.
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The writer is a researcher at the Centre for Political Studies, Indonesian Institute of Sciences (LIPI), Jakarta, and author of Reformasi Sektor Keamanan Pasca Orde Baru (Post-New Order security sector reform), 2013.
Future of the defense industry under a new leader | The Jakarta Post
PAL teams up with foreign shipyards to expand
Wahyoe Boediwardhana, The Jakarta Post, Surabaya, East Java | Business | Sat, July 19 2014, 3:33 PM
State-owned shipyard PT PAL Indonesia plans to increase its production capacity by cooperating with foreign shipyards, including those in Jeddah, Saudi Arabia, and Hong Kong.
According to PAL’s production director, Edi Widarto, the move is in response to the increasing demand for vessels from domestic and foreign clients, intended both for commercial and military purposes.
“PAL’s board of directors will travel to Jeddah to finalize the planned collaboration. As of now, the plan is still under discussion,” Edy said, declining to provide more details.
Aside from the production deal, PAL is also seeking a funding deal from its partner shipyards, including in Hong Kong.
“If the Defense Ministry were to allocate three shipbuilding projects for the Navy every year, PAL’s maximum production capacity would be reached. Therefore, PAL needs to cooperate with other shipyards overseas to sustain its production of ships and meet the rising demand,” Edy added.
Deputy Defense Minister Syafrie Sjamsoeddin said that the Navy needed up to 40 fast missile boats (KCR), each measuring 40 by 60 meters, to meet its minimal needs by 2024.
PAL Indonesia has just handed over one of three KCR-60 vessels to the Navy. The total cost of the entire project is estimated to be around Rp 370 billion (US$35 million).
PAL is also in the middle of building two landing platform docks (LPDs) for the Philippine navy, with a price tag of up to $90 million.
Edy also said that PAL planned to build vessels for Myanmar and Turkey.
He explained that the collaboration with Myanmar was due to begin this month, but the company had yet to receive the formal orders.
“We have not received any information on what the countries need. Both Myanmar and Turkey have so far only expressed their interest in our production,” he said.
Meanwhile, for the domestic market, PAL is cooperating with several regional administrations to build ship-maintenance facilities.
The facilities will be built in Cilegon, Banten, and Lamongan, East Java.
To accommodate the project, the Cilegon administration has offered 50 hectares of land for the construction of one of the facilities.
“Building the facilities is, in itself, relatively easy. However, in order to do so, we need to reclaim some 400 meters of land from the sea. Added to that, the amount of materials needed to build the facilities is less than that needed to build new ships,” he said.
Cilegon is home to the busy and congested international port of Merak.
Furthermore, PAL has also been asked by the government to expand its operations to accommodate an oil and gas development project in Lamongan.
Aside from the military and commercial vessel projects, the company also deals with the construction of general engineering that focuses on developing offshore platforms.
(dyl)
PAL teams up with foreign shipyards to expand | The Jakarta Post
