Indonesia is working towards military modernization and has introduced a law that will prompt increased local content and less reliance on exports in the local defense industry.
To start with, I would like you to give us a bit of background as to the defense industry in Indonesia. During the Asian crisis in 1997/98, Indonesia was one of the most affected countries in the region. The government had to impose strict budget restrictions and priority was given to the economic recovery and social development, while military spending obtained low priority with an average allocation of well below 1% of GDP. It is only in recent years that more attention has been given to the defense industry in terms of budget. Can you tell us about the efforts you are making to catch up for this lost decade? What is your strategy to modernize the military and improve the efficiency and overall capacity of the defense industry?
The economic crisis that took place in 1998 did not only mark the change from the old era into the new era. It was also the time when the old government was transformed into the new reformed government. Therefore, the crisis also marked the beginning of the new era of democratization in our country and that is very important.
On the economic side, it took us a while to recover from the crisis. Our priority was to focus on the economy and social welfare and it is only in the last 5 to 10 years that our economy grew stronger. It was then also time for the defense industry to recover.
Our philosophy is that if we want to have a strong country, we need to have strong armed forces. And if we want to have strong armed forces, we need a strong defense industry. That is why it is necessary to strengthen in parallel our armed forces while we push the defense industry further. That is a key point.
The overall economy has been gradually improving and the Government has been able to increase the budget allocation for the defense industry and the armed forces. I believe that in this Cabinet we have a very good starting point to boost the defense industry as we received the highest proportion of the budget so far. Our current budget is close to 1% of the GDP. From 2000 until now, the budget has increased tenfold.
In the 2010-2014 period, the defense budget allocation has experienced a significant growth. In 2010 the budget ceiling was Rp. 42,31 trillion (0,71% of the GDP), whereas in 2014 it is Rp. 84,42 trillion (0,88% of the GDP). However, the budget that is provided is still far from what we need for defense to realize its development, which is something between 1.8%-2.1% of the GDP.
In 2010, the Government established the Defense Industry Policy Committee. What led to the establishment of this Committee and what role does it play together with the Ministry of Defense in optimizing the operations of Indonesia’s armed forces?
In the past, before we formed this Committee, there were several ministries taking care of the defense industry – the Ministry of Industry, the Ministry of State Owned Enterprises, the State Ministry of Research & Technology and the Ministry of Defense. There were many fingers in the pie, which was not good as it was slowing things down. So I put forward the idea to the President of forming one body to take care of the defense industry. The President agreed and the Committee was formed under a presidential decree.
I was named the Chairman of the Committee; the Vice Chairman is the Minister of State Owned Enterprises; the members of the Committee are the Minister of Industry, the Minister of State Owned Enterprises, the Minister of Research & Technology, the Chief of the Armed Forces, the Chief of Police and the Vice Minister of the Ministry of Defense, who takes the position of Secretary.
As a result, the work in the defense industry has been synchronized and, so far, it has been working very well. The defense industry is growing; some of the companies can now supply the equipment to the army, the navy and the air forces. Some of the companies have even started exporting which is a great progress.
In 2010, the Ministry of Defense elaborated a 15-Year Strategic Plan under which $15 billionis to be spent in the first phase due to end in 2014. Can you tell us more about this plan and its objectives?
The 15-Year Strategic Plan is related to how we can empower and strengthen the defense forces. We have three components in our concept – the first is research and development (R&D) and we have to develop our capacity in this area; the second is the defense industry, which has to be supported by R&D; and third are the armed forces which have to be supported by the defense industry.
We have broken the fifteen years down into three 5 year plans – we call it strategic planning from 2010-2014, 2015-2019 and 2020-2024.
2010-2014: The main components for this 5 year plan are to emphasize the principal of zero growth and right sizing, meaning not to add the number of personnel, but to organize and position every personnel according to their competence, and this goes for every position in the organization. The armed forces development is directed to strengthen interoperability among services, in order to enhance its joint operation on the field. For the ground force, the main focus will be on developing its capability in the field of maneuverability and fire support, along with the transformation of its doctrine, training and leadership education system. The main focus for the sea force will be on changing its organization, while the air force will be focusing on the process of adding new combat squadrons.
2015-2019: The main focus these 5 years will be a continuation of the previous 5 years. The ground force will focus on the enhancement of its air defense, mobility/counter mobility and utilization of nanno technology in combat intelligence. The sea force will continue changing its organization with the development of working units. The air force will continue on the previous 5 years.
2020-2024: The main focus of the ground force will be a continuation of the previous years. The sea force will be focusing on the completion of software specially designed for the sea force. The air force will continue on the previous years.
What and your priorities in terms of military modernization?
Indonesia covers a wide area on land and sea, with a very large population and abundant natural riches, so the military has a big responsibility. Therefore, modernization of the Indonesian military (TNI) is necessary in order to ensure the sovereignity and integrity of our country, as well as the safety of our people.
We have a program to empower our armed forces. This government has allocated a budget of $15 billion to develop the equipment for the army, the navy and the air force. The government seeks to elevate the independence of the national defense industry, so some of this budget will be directed to the local companies. If possible, the equipment has to be made in Indonesia, but if not, we will ask local companies to create joint ventures with international defense industries. We have a step-by-step approach to ask state companies to join. We will leave the flexibility to the state companies.
The form of cooperation concerns increasing local content, technology transfer, and off takers and offsets. Offsets means that if we buy from someone, they also have to buy from us. For example, we are cooperating with the South Koreans to develop fighter planes. We have a 20% share, so if the Korean industry makes 250 units of fighters, then we will get 50 units.
The fulfillment of the needs for defense equipment should be sought in the national defense industry and our dependency of products from abroad should be minimized. The government gives guarantees to banks and financial institutions that support the funding of the development and the utilization of the defense industry.
With the military modernization, development of infrastructure is also requiered. Currently, PT PAL and PT DI are pioneering in setting up the development of infrastructure by manufacturing submarines and jet fighters respectively. It is expected, that within 2 or 3 years, Indonesia will have its own infrastructure for manufacturing submarines and jet fighters with advanced technology.
If possible, we will do government-to-government agreements, under the Government’s umbrella. We have had a past experience when our country was under an embargo. Then we had a problem with spare parts, so for example our fighter planes could not fly. Therefore, now we are looking for company-to-company and government-to-government cooperation.
By when do you expect Indonesian defense industry to be self-reliant?
Our defense industry should be self-sufficient by 2029.
Military modernization is a common phenomenon for the entire region. Actually, this region has the highest military expenditure in the world. How do you cooperate with other ASEAN members to ensure regional stability?
Modernization is important because the economy and security are like two sides of a coin. When your economy develops, then the security aspect also has to improve. There has to be a balance between the economy and security. This is the case in the entire region and Singapore, Thailand, Vietnam and the Philippines are modernizing their military as well. We need to have modern defense equipment to protect the sovereignty of our country. Sovereignty is key. We want to modernize in order to maintain our sovereignty.
ASEAN was formed in 1976 and economic cooperation started. Nevertheless, ASEAN also underlined the importance of stability and security, so the defense cooperation started in 2006. We were really careful not to get ASEAN to form a military pact. ASEAN is not a military pact. We have a very strong cooperation amongst the pan-ASEAN countries.
What will move the defense industry forward includes also the agreement amongst the ten ministers and the ASEAN defense industry collaboration. We see that the market in Indonesia is big – $25 billion per year - but so far, the market has to import from elsewhere. This is why it is very important that we develop ASEAN’s defense industry. We hope at some point we will be able to deliver our equipment to ASEAN’s members.
Another way of ensuring regional security is through networking and peacekeeping centers. Most of the ASEAN member countries send their peacekeepers for peacekeeping operations around the world. This concerns using military assets for humanitarian assistance and disaster relief (ADR). We are very strong in military operations, which is important, as we form people-to-people contact.
We believe that we can achieve the ASEAN Community by 2015. There will be 3 pillars: one pillar is the ASEAN political security community, and the defense and security falls under this pillar; the second pillar is economy; and the third pillar is socio-cultural.
What is the role of the military when it comes to transparency and protection of human rights?
The Ministry of Defense and the military always honor the principles of democracy and human rights. There is no soldier that is above the law, and the military abides by regulation and the consititution. An example is the case of a group of the Army’s Special Forces (Kopassus) soldiers who are alleged to have participated in the murder of police detainees in the Cebongan prison in Yogyakarta. The trial was covered by national media, whereas some electronical media aired the trial live. It was also obeserved by National Committee for Human Rights.
In regards to transparancy and issues of human rights, the Government has created a mechanism for coordinating human rights activities across Indonesia. This was issued by a presidential decree. The committee's tasks include establishing and strengthening institutions enforcing the National Action Plan on Human Rights (RANHAM), preparing the ratification of international human rights instruments, disseminating human rights information and monitoring, evaluating and submitting human rights reports to the president.
What are the main threats and menaces that you face domestically?
Terrorism is a serious threat that has already caused many casualties and financial losses. Even though our Police Special Unit for Counter Terrorism had successfully apprehended and killed several terrorists, terrorism is still a serious threat in Indonesia.
With the establishment of the National Anti-Terrorism Agency (BNPT) it is expected that terrorism will be prevented. The National Counterterrorism Agency (BNPT) has formed a Coordination Forum for the Prevention of Terrorism (FKPT) in 21 of the 33 provinces/regions already. An FKPT is a special forum tasked with preventing the propagation of radical ideas closely associated with terrorism by designing and launching a deradicalization program.
Next to terrorism, separatism can be seen as another domestic threat. The regions Aceh, Maluku and Papua all have their own reasons wanting to become independent and sometimes use violent actions and shootings. The way to handle this is by talking and negotiation with the parties concerned.
Another domestic threat Indonesia is facing is the threat of natural disasters. With its geographical position, our country has the potential for volcanic eruptions, earthquakes, tsunamis, floods and landslides. To cope with the natural disasters, it is important to map the vulnerable areas, maximize the role of the Provincial Disaster Management Agency (BPBD) and train the people who live in the vulnerable areas.
One of the flagships of President Obama’s administration is the US strategic pivot towards Asia Pacific. How is this shift reflecting the growing importance of the region in both strategic and economic terms? How would you assess the evolution of US-Indonesia relations in recent years?
There is a dynamic equilibrium. The US itself is committed, and it regularly says that its presence in this region is for stability, security and to rebalance power. This basically means that power is balanced between the strong players in the region.
The presence of the US in Asia Pacific has proven to be an advantage for many countries in this region that are gradually becoming economic powerhouses, like Japan, China, India and South Korea. The presence of the US is formed as full DIME (diplomatic, information, military and economy) and is actually conducive for the region. Therefore cooperation is very important.
During the Cold War, the priority was security, but now it is more about the economy. Asia is growing in terms of economic prosperity. If you want to move up and your economy is growing, you will need security. Besides that, you have to be supported by a secure region if you want to do business and develop your economy.
That is why we agree with ASEAN Plus 8 (a counterterrorism alliance between ASEAN countries and China, the US, South Korea, Australia, Russia, India, New Zealand and Japan) that the foundation of economic progress is security. ASEAN Plus 8 countries are committed to achieving stability, security and freedom.
In your opinion, how can Indonesia, together with the US, counterbalance the increasing militarism and assertiveness of the Republic of China in the South China Sea?
There was almost a deadlock when we had a meeting in Cambodia before. There were concerns about the centrality of ASEAN. Indonesia is playing a good role by looking at how it should be used, when we try to get meetings with China on codes of conduct. Now that ASEAN is solid, it wants to discuss and work with China on the code of conduct.
In 2002, there was a declaration of conduct, but it was not solid or binding. It was just a declaration. ASEAN and China agreed that the South China Sea issue should be resolved peacefully, but meanwhile the area has to be free of mitigation, and it has to be peaceful and secure. But we removed the declaration of conduct after ten years.
The good news is that ASEAN proposes to work with China and that we are starting from the bottom. We are not starting from the top, with the head of state – we are starting with the technical people. There are systems within our multilateral cooperation, where you have a technical meeting first and then you move up to a ministerial meeting, which is subsequently ratified by the head of state. The important thing is not to stop. We understand that there are going to be some differences and discrepancies, but that is OK. As long as we talk and move, hopefully there will be convergence to one point.
In times of increased religious tensions worldwide, as the most populous Muslim nation in the world, Indonesia serves as a testament that Islam and democracy can go hand-in-hand. How important is the role of your country as a model for moderate Islam?
Indonesia is the biggest Muslim country in the world. At the same time, we truly embrace and support democracy. Even President Obama said that he believed Islam could work together with democracy. Indonesia is in the process of consolidating its democracy so in a way we are a “life laboratory” for Islam and democracy coexisting together. People respect us for our achievements and we want to be an example for other Muslim countries.
One of the main objectives of our publication is to focus on the economic development and opportunities that the country offers. With over 240 million people, Indonesia is the economic powerhouse of South East Asia and an attractive market for foreign investors. In which areas of the defense industry would you like to see increased cooperation with other international players and the US in particular?
We already cooperate with the US, China and other nations. For example, we cooperate with China to develop our guided missiles, and we work jointly with Turkey on developing our medium tanks. Indonesian armed forces are very familiar with weapons systems originating from the former countries of the Eastern Block. We had the experience with the US arms embargo, so we do not want to depend on one country only.
We would like to encourage the transfer of technology. This is very important for us if we want to become self-reliant in the future. Western technology from the US and Europe is very popular in Indonesia and we already cooperate with the US. The question is to which extent the US wants to provide added value to the defense industry in Indonesia.
We hope that by cooperating with American companies in developing our defense industry through technology transfer, companies like PT DI, PT PINDAD, PT PAL - as well as other private companies related to military equipment - will be able to fulfill the needs of defense locally. We also aim to become a part of the global supply chain and cater to the military needs internationally. We are in that process and we work openly with the international community.