It Takes Firm Commitment to Build Self Reliance

AMBROSIUS HARTO MANUMOYOSO

President Joko Widodo (red vest) and the ranks of the Advanced Indonesia Cabinet receive an explanation about the assembly of the Alugoro-405 submarine before a limited meeting at PT PAL Indonesia's submarine production facility, Surabaya, East Java, on Monday (27/1/2020).

JAKARTA, KOMPAS — Law No. 16/2012 concerning the Defense Industry mandates the development of a self-reliant domestic defense industry capacity. However, 10 years after Law No. 16/2012 was issued, it is estimated that only 15-25 percent of the procurement of the main weapons-system equipment comes from within the country.

It needs a strong institution as an executor to be a bridge between policy and the implementation of a self-reliant defense industry.

Law No. 16/2012 stipulates the existence of a Defense Industry Policy Committee (KKIP) to coordinate national policies in the planning, formulation, implementation, control, synchronization and evaluation of the defense industry.

In the last meeting of the KKIP on 13 April 2021, President Joko “Jokowi” Widodo underlined the importance of the continuity of the defense equipment procurement for the sake of defense industry self-reliance. However, this has not been followed by detailed instructions complete with time targets and consequences.

KKIP's head of Technology and Offsets, Yono Reksoprodjo, in mid-September 2022, emphasized that if Indonesia really intends to build a defense industry, it needs government commitment to appreciate domestic products by buying them.

According to him, the assignment to ministries and agencies to purchase defense and security equipment (alpalhankam) needs to be accompanied by presidential instruction. It needs a mechanism accompanied by sanctions if it is not complied with. "It is the president who can force the ministries and agencies because now there is too much room to evade," said Yono.

Head of the National Private Defense Industry Association, Jan Pieter Ate, estimates that only 15 percent of the procurement of defense equipment for the Indonesian Military (TNI) comes from within the country.

During the discussion of the book, Illusion to Develop National Defense and Security Industry Self-Reliance, Bobby Rasyidin, president director of Defend ID, the defense-industry holding, said that currently only about 25 percent of the defense and security needs of the ministries and institutions are being met domestically. Head of the National Private Defense Industry Association, Jan Pieter Ate, estimates that only 15 percent of the procurement of defense equipment for the Indonesian Military (TNI) comes from within the country.

A number of obstacles

Director of Defense Technology and Industry at the Directorate General of Defense Potential, Defense Ministry, Wajariman, admits that there are several problems that hinder the defense industry. These include, among other things, the interaction between the government/KKIP, the users and the defense industry. Also, the users are inconsistent in planning. In addition, the management of the defense industry ecosystem has not yet been established. In fact, there is disharmony between state-owned enterprises and privately owned enterprises. From foreign parties, because Indonesia's purchase volume is small, the offset and local content provided are also limited.

KOMPAS/WAWAN H PRABOWO

The Ministry of Defense (Kemenhan) of the Republic of Indonesia again held the Indo Defense 2018 Expo and Forum defense industry exhibition at JIExpo Kemayoran which was officially opened on Wednesday (7/11/2018).

In addition to the TNI/National Police, there are also many ministries/agencies that need to purchase defense and security equipment for their operational needs, such as for operations at sea and natural disaster management. However, many of them still buy from abroad even though similar goods have been produced in Indonesia.

Rear Marshal (Ret.) Eris Herryanto, deputy chairman of the KKIP Implementation Team in the first period, said that KKIP was actually established to force domestic production of the defense industry to be purchased by domestic users. This is done by coordinating three policymakers, namely the TNI/Polri and institutional ministries as the users, industry as the producers and the government.

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"It must be forced indeed. The defense industry can only survive if the government buys it. The market is under a monopsony, meaning there is just one consumer, although we are also aware that the government's budget is limited,” said Eris.

According to Eris, there is a tendency for users to not fully trust domestic products because there is an operational need that requires qualified equipment. He admits that industries that are just learning to make weapons are not necessarily skilled. Here, KKIP is the mediator, ensuring that security standards are not lowered and it (KKIP) serves as a bridge so that the defense industry continues to make improvements.

In fact, they have invested in tools and infrastructure.

On the other hand, the industry also does not have confidence that its production will be purchased by the government. Due to the uncertainty of long-term procurement by the government, the defense industry struggles to survive because their production is threatened with discontinuity. In fact, they have invested in tools and infrastructure.

"It is indeed difficult when the agency changes its procurement plans. Change the leader, change the goods. How can KKIP make a master plan to comply with the defense and security system if the plans of each agency are uncertain?" asked Eris.

KKIP's Role

Wajariman said KKIP is an advisor who will be involved in the discussion when there is a problem. Within the structure of the Defense Ministry, procurement is handled by the Defense Facilities Agency of the Defense Ministry (Baranahan). According to Wajariman, there are conditions that must be met in every purchase, namely reciprocal trade, local content and offset (IDKLO).

“The Baranahan contract is not effective when the IDKLO agreement has not been agreed on. We report to KKIP," said Wajariman.

However, according to Yono, there has not been an optimal orchestration between KKIP, which wants to encourage the defense industry, and the Defense MInistry, which is tasked with defending the country. On the other hand, there are many parties who have interests, then distort national interests. "Sometimes KKIP doesn't want to sign because it doesn't meet the requirements; however, it turns out to be a pass," said Yono.

KOMPAS/RADITYA HELABUMI

Various defense and security tools made in Indonesia are exhibited at the Ministry of Defense, Jakarta, Tuesday (3/12/2019).

Such conditions require solutions that are supported by all stakeholders. Bobby Rasyidin invited all parties to sit down together. The government, which is the regulator as well as the user, must be the backbone for the defense industry to grow. Intense discussions need to be held between industry, both BUMN and private, with regulators, KKIP and the procurement department of ministries and institutions. According to him, there needs to be a match between needs and mastery of technology.

As a result, the economic value of defense and security production can be fulfilled and the excess production can be exported.

The same thing was conveyed by Yono Reksoprodjo. He said there have been several breakthroughs that are more detailed in the monopsony market framework. With the certainty of purchasing the defense and security-equipment products, for example, there will be a revolving fund in collaboration with banks. In addition, we can also think about the possibility of an institution that becomes a stock center such as the State Logistics Agency (Bulog). As a result, the economic value of defense and security production can be fulfilled and the excess production can be exported.

In addition, we need to strengthen KKIP. The absence of an implementer or operator is a broken link. (EDN/JOS)

This article was translated by Kurniawan Siswo.