Blog · May 4, 2022

Indonesia’s defence shopping spree | East Asia Forum

Authors: Fitri Bintang Timur and Jovita Komala, CSIS Indonesia

In February 2022, Indonesian Defense Minister Prabowo Subianto signed agreements with France to purchase 42 Dassault Rafale fighter jets and two Scorpene-class submarines. Soon after, the United States conditionally approved the sale of 36 F-15EX fighter jets. The aircraft alone will cost Indonesia US$22 billion. The country has been buying big since 2021 when it announced plans to acquire six FREMM- and two Maestrale-class frigates from Italy as part of a US$125 billion long-term modernisation plan.

The case for modernisation is clear, and was compounded in 2021 when the 40-year old submarine KRI Nanggala (402) sank after a mechanical failure — this too followed a series of military plane crashes. Indonesia has suffered from a lack of modern weapon systems since the late 1990s due to the combination of a monetary crisis and an arms embargo imposed for human rights violation in East Timor. Although the embargo was lifted in 2005, Indonesia is still yet to catch up.

With increasing incursions of foreign vessels into its exclusive economic zone and rising cases of illegal fishing, piracy, drug smuggling and human trafficking, Indonesia is badly in need of reliable defence equipment with sufficient deterrent power to protect its territory. The Rafale, which has a radar system that can oversee a 100 kilometre radius, provides further reach compared to Indonesia’s existing F-16’s limit of 84 kilometres.

But Indonesia’s decision to make purchases from different countries has drawbacks. The additional costs and delays of developing training facilities, training personnel, acquiring spare parts and maintenance cannot be ignored — different aircraft have different needs for all of these. On top of that, system interoperability will be an issue requiring careful thought. But Indonesia perceives that these challenges are outweighed by the benefit of wide-ranging defence platforms in countering possible future embargoes.

The decision to buy from Western countries was also influenced by the Countering America’s Adversaries Through Sanctions Act, a US law passed in 2017 imposing sanctions on countries that procure arms from Russia, North Korea and Iran. Other Southeast Asian countries, such as Myanmar and Vietnam, who continue to purchase weapons from Russia have been subjected to sanctions and embargoes by the United States. To avoid this threat, Indonesia opted out of a more affordable purchase of Sukhoi Su-35 aircraft.

It seems that Indonesia is hitting two birds with one stone — dodging the sanctions bullet and also bolstering its defence industry. Indonesia’s 2012 Defence Industry Law prescribes that strategic purchases must contain at least 35 per cent local components. Before the deals can fly, the presence of such trade benefits must be examined by Parliament and the Ministry of Finance. This is why the agreement to purchase from Rafale comes with strings attached, with the memorandum of understanding noting a technology transfer to Dirgantara Indonesia. Indonesia hopes this will help pave the way to building a sustainable defence industry.

But it’s not all clear skies ahead. Indonesia’s defence budget has remained at around 0.8 per cent of GDP for the last 15 years, despite its Minimum Essential Force Roadmap 2024 stating the need to increase this to 1.5 per cent to meet its requirements. In a last attempt to push for the roadmap’s implementation, President Joko Widodo signed a presidential regulation in 2021 providing an additional US$2.06 billion solely for defence equipment and industry, topping up the US$8.3 billion defence budget for 2022 that is struggling to cover the routine costs of salaries, fuel, arms and maintenance in addition to building traditional and cyber capabilities.

The ambitious purchases of Rafale and F-15 jets will definitely disrupt the allocation of this budget. Going through with the purchase will leave Indonesia with no other choice than to enter into a long-term debt contract, unless the country manages to negotiate a payment arrangement similar to what it has previously made with Russia — a countertrade payment that is partly in cash and partly in commodities such as palm oil and rubber.

Indonesia can only hope that it is not putting too much confidence in the West — particularly the United States and France — and the block will not repeat imposing embargoes. This outlook is made on the basis of Indonesia’s cordial bilateral relations with both countries in the past decade. But Indonesia’s role of holding the G20 presidency this year is complicated by the robust international condemnation of Russia’s invasion of Ukraine.

While Indonesia is trying to stay neutral and direct the global grouping’s focus on economic cooperation, several other countries involved are attempting to bring Russia–Ukraine issues to the G20 meetings, demanding Indonesia to block Russia’s participation. Hopefully Indonesia’s decision to stay impartial will not hamper its defence procurement ambitions that will surely continue beyond 2022.

Fitri Bintang Timur is a Senior Researcher and Jovita Komala is a Research Assistant at the Centre for Strategy and International Studies (CSIS) Indonesia.