Международное военно-техническое сотрудничество Индонезии на современном этапе: тенденции и перспективы

The Republic of Indonesia is a country with many uniqueness. It is the largest country in Southeast Asia and the fourth most populous country in the world, consisting of different races, ethnicities, and religions. The infinite complexity of threats is inherited from being the largest archipelagic nation and located between two oceans and two continents at the world’s crossroads, having about 17,508 islands. Hence, threats are coming domestically, also from the evolving regional and global security situation. The vulnerabilities generated need to be compensated by a sufficient national defense force and a robust military posture.
Indonesia has a long history of contribution on the international stage, from being one of the founding fathers of the Association of Southeast Asian Nations (ASEAN), one of the champions of the Non-Aligned Movement, and being vocal on the anti-colonialism movement since World War II was over. Moreover, Indonesia has also been actively sending its resources for the United Nations peacekeeping operations. Economically, Indonesia climbed up its way to be a part of the G-20 with the third-highest growth rate after China and India and the largest economy in Southeast Asia. Just like the neighbouring Southeast Asian countries, Indonesia keeps on increasing its national military budget and procurement. The Ministry of Defense has the biggest spending among Indonesia’s ministries, and it keeps on increasing in the last decade, even despite the global pandemics1.
In the discourse of military-technical cooperation, Indonesia deserves special attention for many reasons. First, the nation holds free and active policy, with no security alliances nor military bases, the nation claims that Indonesia will not lean to any sides. It explains why Indonesia actively pursues international defense cooperation with many partners to strengthen its own military power. Second, Indonesia is a precedent case for offset in the region, and the first country outside of the socialist nation to adopt a countertrade policy and legally codify it. In fact, since the 1970s, the government has been using offset as a way to transfer technology from abroad to enter the global market2. Third, with the increased purchasing power, Indonesia is one of the biggest arms importers both in the region and the world. In tandem with the
1 Informasi APBN 2021 (State Budget Information 2021) // Ministry of Finance of Indonesia. URL: https://www.kemenkeu.go.id/media/13730/informasi-apbn-2020.pdf (Access date: 31.05.2021); and Melihat Anggaran Alutsista di Kemenhan 10 Tahun Terakhir (Looking at the Weapon and Defense Equipment Budget at the Ministry of Defense for the Last 10 Years) // CNN Indonesia. 26.04.2021. URL: https://www.cnnindonesia.com/ekonomi/20210426210908-532-635070/melihat-anggaran-alutsista-di- kemenhan-10-tahun-terakhir (Access date: 31.05.2021).
2 Parsons J.E. A Theory of Countertrade Financing of International Business // Working Paper. Alfred P. Sloan School of Management. Massachusetts Institute of Technology, 1985, P. 1-2.
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reasons, Indonesia has ambitious national goals to strengthen its national military forces (TNI – Tentara Nasional Indonesia), modernize its defense and security equipment tools (Alpalhankam – Alat Peralatan Pertahanan dan Keamanan), and bolster the development of the domestic companies in the national defense industry to fulfil the Minimum Essential Forces (MEF).
The goal of this master thesis is to find out about the reasons and factors that influenced the Indonesian government’s policy in the foreign military-technical cooperation, also to forecast the main direction of the policy. The term “foreign” is emphasized to clarify that the notion is for cooperation with foreign partners. Hence, this master thesis will mostly be practical instead of theoretical. The practicability of this research that can be derived is for foreign arms vendors to assess the possibilities of entering Indonesia’s market. Southeast Asia, including Indonesia, is a very attractive market for arms sales. To achieve the goal, this research has the following formulated sub-tasks to complement the main goal:
1. Identify the main trends and development in the regulation and policy
2. Rationalize the reasons about why the policy was created
3. Understand the decision-making process in foreign military procurement
4. Analyze the major problems and achievements related to the policy implementation
Since this research is about the contemporary situation, the timeframe is flexible, but the study’s starting point is 2010. The year is the start of Minimum Essential Forces (MEF), a manifestation of effort to achieve a minimum level for the national armed forces to face threats. 2010 is also the year of establishment for the Defense Industry Policy Committee (KKIP – Komite Kebijakan Industri Pertahanan) as a significant step and turning point in strengthening the national defense industry. The time of writing this research is challenging due to many reasons. The MEF is still ongoing until 2024, the current Presidential period has just started in 2019, and 2020 is the year where the pandemic heavily impacts the national defense industry. However, by conducting this research, the trends and developments in Indonesia’s foreign military-technical cooperation can still be illustrated by highlighting main events, achievements, and shortcomings. The recent Indonesia’s sub sunk submarine is one of the major incidents globally, which gained international attention and internal demand to fasten the Alpalhankam modernization process.
There are diverse sources this research relies on to achieve the goal and fulfill the sub- tasks. The primary sources include the official Indonesian government documents and
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websites, statistical information from open sources, also news resources on event reports. The secondary sources include existing literature from Indonesian and international scholars, also news resources when they contain analysis and opinions. Those sources will illustrate the development as indicators in the procurement dynamics and give insights into Indonesia’s national discourse and discussions as a democratic nation.
The author has taken all of the available legislative documents in the contemporary situation related to military-technical cooperation. It can give sufficient information to trace the development and rationalization of the policy and achieve the goal of this research. The 2012 National Defense Law3 is created to regulate Alpalhankam procurements from abroad and ensure that all activities will include the domestic companies in the national defense industry. Government Decree Number 76 adopted in 20144 regulates the trade return mechanisms as a condition for Alpalhakam imports, which defines trade return as reciprocal trading activities between Indonesia and foreign partners depending on the contract value. Furthermore, Ministry of Defense Decree Number 30 of 20155, to a greater extent, elaborates on the regulation of Local Content and Offset (KLO – Kandungan Lokal dan Ofset) and mentions the examples about the scheme of military-technical cooperation activities. Defense White Paper 20156, as the latest Indonesia’s white paper, also mentions industry participation as a return and compensation of the procurement contract back to Indonesia. Official websites of the government also include statements, event reports, and press releases in the sphere of procurement and military technical cooperation. The reliance on these primary sources will give insights into the official government’s views and chronological developments on the national policies.
Moreover, the secrecy nature of military procurement may limit public transparency of the government’s obscurity, so that this research also relies on open source data for statistics, which are Stockholm International Peace Research Institute (SIPRI) and the United Nations
3 Republic of Indonesia. Undang-Undang Republik Indonesia Nomor 16 Tahun 2012 Tentang Industri Pertahanan (National Law of the Republic of Indonesia Number 16 of 2012 Concerning Defense Industry, 2012.
4 Government of the Republic of Indonesia. Peraturan Pemerintah Republik Indonesia Nomor 76 Tahun 2014 tentang Mekanisme Imbal Dagang dalam Pengadaan Alat Pertahanan dan Keamanan dari Luar Negeri (Decree of the Government of Indonesia Number 76 of 2014 concerning Trade Return Mechanisms in Defense and Security Equipment Tools Procurement), 2014.
5 Defence Ministry of the Republic of Indonesia. Peraturan Menteri Pertahanan Republik Indonesia Nomor 30 Tahun 2015 tentang Imbal Dagang, Kandungan Lokal, dan Ofset dalam Pengadaan Alat Peralatan Pertahanan dan Keamanan Dari Luar Negeri (Decree of the Minister of Defense of the Republic of Indonesia Number 30 of 2015 Concerning Trade Returns, Local Content, and Offsets in the Procurement of Defense and Security Equipment From Abroad), 2015.
6 Defense Ministry of the Republic of Indonesia. Indonesian Defence White Paper, 2015. 5

Register of Conventional Arms (UNROCA). There are, however, limitations from open-source data as such. SIPRI data can only extract the import percentage from the total arms provider, not the comparison with domestic Providers. SIPRI also only provides Indonesia’s arms transfer about the aircraft’s export and not shipbuilding nor land systems due to the different modes of production. In the case of UNROCA, there are differences between the reports submitted by Indonesia and the partners since it uses a voluntary principle. Indonesia also stopped reporting since 2008, so there is no contemporary data to be analyzed. However, open- source data may provide insights and illustrate the chronological trends, weapon types, and foreign partners, such as the fact that Indonesia imports Alpalhankam from Israel despite having no diplomatic relations, which will be elaborated in Chapter 3.
News platforms are treated as the primary source when they only provide reports and information on certain events without any analysis. This is because military procurement is a long process that takes a lot of time, from the negotiations to the time of delivery. Often, there are discussions without official statements about final decisions in the long process of secretive military procurement. Hence, relying on news platforms as a primary source can give indicators and illustrate the development of certain military procurement and arms deals Indonesia has.
In the national discourse, there are existing works of literature about Indonesia’s national defense industry. However, it is not done under the framework of academic research but the government’s consultant’s capacity so that it is not open to the public7. However, there are also public academic papers and literature about the national defense industry and MEF fulfillment, especially since the 2012 National Defense Law was released. Savitri, in her PhD dissertation, provided the most extensive knowledge and context on the understanding and practice of offset for Indonesia’s national journey to be an autarky in production. As a scholar and practitioner in Indonesia’s defense offset, she interviewed the domestic companies about the impacts of offset programs. Savitri also provided policy recommendations for the government in the absence of clear guidelines to do pre-offset planning and to formulate strategic objectives in offset. She also pointed out that at the beginning of an offset relationship, the political motives may be more significant than the economic ones when both buyers and sellers share the same objectives. Yet, her thesis specifically addresses the impacts on the national economy and defense industrialization, not the political considerations. Also, she mentions that the lack of clarity in Indonesia’s offset guidelines may make foreign vendors
7 Industri Pertahanan Modern (Modern Defense Industry) // Online Seminar of Curie Maharani Savitri. 20.06.2020. URL: https://www.youtube.com/watch?v=TgjV7BwDbwE (Access date: 22.04.2021).
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hesitant to propose long-term investment and not aware of the importance of Indonesia’s expected returns8.
Other scholars such as Susdarwono et. al.9, Sulistyo10, Gindarsah and Priamarizki11, and Chairil12 have studied the policy development of the national defense industry and security. Susdarwono et. al. have traced the legal development of Indonesia’s policies to strengthen the national domestic companies, yet the research stopped in 2018, when there are new regulations and decrees in the following years. Sulistyo examined security policy development and the practice of technology transfer. His conclusion shows that Indonesia prefers variety and distribution of technology over quantity and that the modernization effort has too limited deterrent effects to be considered assertive. However, his research approach leans heavily on the security dynamics in the region and that Indonesia’s efforts are a response towards those dynamics. Gindarsah and Priamarizki, in their book chapter, emphasized Indonesia’s policies to be self-sufficient in rebuilding its national defense industrial base by pursuing technology transfer. Chairil tries to reveal the political and military rationalization behind Indonesia’s military procurement and concludes that the strategy of arms supplier diversification is helpful to prevent domination of a single source. Nevertheless, the politico-security factors are mostly about Indonesia’s internal organizations, which are the relations between TNI and the defense companies. A number of books also provided the historical context of the rise and fall of the national defense industry. It provided measures to strengthen it, supported by the government’s policies in their confidence13. Numerous academic papers provide cases of defense cooperation
8 Savitri. C.M. Contribution of Offset to Defence Industrialization in Indonesia. PhD Thesis. Cranfield Defence and Security, 2016.
9 Susdarwono E.T. Ekonomi Politik Pengadaan Alutsista Kapal Selam Changbogo dalam Rangka Menuju Proses Kemandirian Industri Pertahanan Indonesia (Political Economy of Procurement of the Changbogo Submarine’s Alutsista Towards the Independence of the Indonesian Defense Industry) // Jurnal Ilmu Ekonomi Terapan, 2019. Vol. 4, No. 2. P. 115-181.
10 Sulistyo I. Kebijakan Pertahanan Indonesia 1998-2010 dalam Merespon Dinamika Lingkungan Strategis di Asia Tenggara (Indonesian Defense Policy in 1998-2010 in Responding to the Dynamics of Strategic Environment in Southeast Asia) // Andalas Journal of International Studies, 2012. Vol. 3, No. 2. P. 165-191.
11 Gindarsah. I. and Priamarizki A. Politics, Security and Defense in Indonesia: The Pursuit of Strategic Autonomy // Indonesia’s Ascent: Power, Leadership, and the Regional Order. Roberts C., Habir A, and Sebastian L. (eds.), 2015. P. 130-154.
12 Chairil T. The Politics Behind Alpalhankam: Military and Politico-Security Factors in Indonesia’s Arms Procurements, 2005–2015. // Competition and Cooperation in Social and Political Sciences. Adi, I.R and Achwan, R. (eds.), 2020. P. 281-290.
13 Karim S. Membangun Kemandirian Industri Pertahanan Indonesia (Building the Independence of the Indonesian Defense Industry). Jakarta. Kepustakaan Populer Gramedia, 2021.; Suryopratomo. Kebangkitan Industri Pertahanan Indonesia (The Rise of the Indonesian Defense Industry). Jakarta. Indonesia. Departemen Pertahanan. Pusat Komunikasi Publik, 2014.; Widjajanto A. et.al. Dinamika Persenjataan dan Revitalisasi Industri Pertahanan (The Dynamics of Weapons and Defense Industry Revitalization). Jakarta. Penerbitan Universitas Indonesia, 2012.
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of Indonesia with specific partners around the globe within the framework of their bilateral relations.
The author is aware that military-technical cooperation is an extensive field of study. It is interrelated with other spheres, such as the economy, security, technology, and others, just as how the national discourse covers the comprehensive features of the national defense industry. Military-technical cooperation also contributes to strategic cooperation, often acting as an element of a broader cooperation network. Its usefulness is to tackle national shortcomings, such as constraints in the budget, technological capability, and human resources quality in weapons production. Hence, it is often closely related to offset, which means compensation asked by the buying country to purchase goods from the seller. However, political and security considerations may play a more prominent role in military procurement than financial reasons. It creates the academic novelty of this study because the scope and limitations of this research are mostly the political aspects of Indonesia’s foreign military- technical cooperation under the framework of the foreign policy principle of free and active. This research will be a puzzle piece to complete the lack of clarity in the official guidelines and provide a new perspective about Indonesia’s military-technical cooperation with foreign partners from the political aspects.
On the other hand, international scholars try to give insights into Indonesia’s position in the defense industry from an external perspective. Bitzinger14 concluded that Indonesia belongs in the second-tier of arms-producing states, meaning that the nation is a developing industrialized country with relatively new attempts at defense industrialization. He concluded that the Indonesian objectives in offset practices are primarily to gain economic benefit, explaining the ambition to indigenize the national defense industry, especially in aerospace. Evans15 also classified Indonesia in the second group of a bimodal system of the third-world nations. The first group has the most advanced and diversified defense industries, while the second is still emerging. Huxley and Willet16 also mention that the origin of Indonesia’s defense industry was to utilize indigenous arms prosecutions for national development and industrialization. The three works of international scholars share the same timeframe, which dated 2004 as the latest. As a source of historical analysis, those works may give empirical
14 Bitzinger R.A. Offsets and Defense Industrialization in Indonesia and Singapore in Arms Trade and Economic Development // Arms Trade and Economic Development. Brauer J. and Dunne P. (eds.) Routledge. New York, 2004. P. 249-263.
15 Evans C. Reappraising Third‐World Arms Production // Survival. Vol. 28, No. 2, 1986. P. 99-118. 16 Huxley T. and Willett S. Arming East Asia. New York. Oxford University Press Inc., 1999.
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context and knowledge about the development of Indonesia’s defense industry to the contemporary situation. However, there have been rapid changes in Indonesia’s national security and defense industry in the last decade, as the characteristics are evolving depending on the influencing variables. Moreover, changes also happen in the balance of power, technology, and the nature of threats Indonesia faces. Although international scholars may study Indonesia’s contemporary situation of military-technical cooperation, this research still provides clarity and insights from an insider view of an Indonesian since this research traces the development and explains the rationalization of governmental policy from the primary sources as the author’s mother language.
The term “military-technical cooperation” itself is rare to be found in Indonesian discourse since the term originated from Russia. It explains why the only agreement titled “kerjasama teknik militer,” which literally translates into military-technical cooperation, only exists bilaterally with Russia. Other agreements with various partners are titled “agreements on the field of defense” or generally “defense industry cooperation.” Indonesia’s Ministry of Defense addresses it as “kerjasama bersifat teknis” – meaning cooperation with technical nature. Hence, the variety of terms creates the absence of a national definition. Nevertheless, existing national regulations for offset implementation in arms procurement from abroad use various terms, such as joint-production, countertrade, buyback, yield trade, offset, domestic participation, and local content. By drawing a line among the existing cases and activities described in the regulations and literature, the activities of military-technical cooperation in Indonesia have actually been practiced over the years.
The all-inclusiveness and comprehensiveness of military-technical cooperation as a concept are why the author uses a specific term as an umbrella to make this research more convenient in illustrating the complexity of activities in the cooperation. Also, with the absence of Indonesia’s national definition, it is pretty challenging to distinguish import, export, and joint projects; Indonesia does with the foreign partners since it is all too interrelated. However, the term of military-technical cooperation will be used as this research focuses on cooperation related to the end-to-end activities of Alpalhankam, from pre to post procurement activities with flexible formats. Such as joint production, joint development, joint marketing, transfer of technology, and all other activities and mechanisms related to the cooperation in producing weapons and equipment.
To reach the goal and fulfill the sub-tasks, this research consists of three chapters. The first chapter is aimed to analyze and trace the development of Indonesia’s policies in military
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procurement and threat conceptualization, as the regulations are evolving, and each country is unique with its basic principles. The second chapter identifies the various partners in the cooperation from the elaborated regulation and principles based on its level of significance and complexity. Chapter three identifies the achievements and shortcomings of the national defense industry, elaborates about the Alpalhankam export and import activities, and provides one case study to illustrate the decision-making process’s implementation.