Interview: Purnomo Yusgiantoro
How can the Indonesian defence industry capitalise on the current economic environment?
PURNOMO YUSGIANTORO: Our defence industry collapsed in 1997 during the economic crisis and only in the past few years has the government sought to develop the industry again. A notable development being the creation of the Defence Industry Policy Committee in 2010. Chaired by the minister of defence and other key ministers, the committee formulates all strategic national policies in the defence industry, as well as coordinates foreign cooperation to advance and develop this field. Under this new framework, the Ministry of Defence has elaborated a 15-year strategic plan (2010-24) and allotted nearly $14bn to be spent in the first phase, which is due to end in 2014.
This budget supports modernisation and improvement of the main defence weaponry systems with a commitment to manufacture domestically, encourage industrial development, expand employment opportunities and enhance technological mastery. The budget also covers the importation of military equipment as an alternative, but only in cases where a proper transfer of technology is fully guaranteed. The benefits of these initiatives are beginning to be seen, with a number of new products already being supplied by our domestic industry. This trend is expected to continue for the foreseeable future.
How can Indonesia ensure a sustainable transfer of knowledge from the military deals being signed with foreign nations?
YUSGIANTORO: It is not us but rather our partners who must guarantee a full transfer of technology. For example, we are currently building three submarines in cooperation with South Korea. The first will be built in South Korea, the second under a joint venture scheme between the two countries, and the third is expected to be fully built in Indonesia by PAL Indonesia, the country’s state-owned company. Several other projects following this model are also under way: the Perusak Kawal Rudal, a guided-missile destroyer that is being built in cooperation with a European shipbuilder; and the C295, a tactical transport aircraft manufactured in collaboration with Airbus Military that will be assembled entirely by Dirgantara Indonesia in the near future. Our new approach invites foreign suppliers to guarantee a successful transfer of technology through the execution of coproduction arrangements and partnership.
What opportunities are there for local and international companies to contribute to the development of Indonesia’s defence industry?
YUSGIANTORO: The areas for engagement vary depending on the expertise of each company. Indonesia already has private local companies that engage in the non-defence equipment sector, including items such as uniforms, helmets, bulletproof jackets and parachutes. As for foreign companies, we constantly evaluate potential joint ventures, and in fact we are now working on several memorandums of understanding with international partners.
So as to be a self-sufficient in military equipment, Indonesia’s parliament issued a new law in 2012. Law Number 16, 2012 allows Indonesia’s defence industry to cooperate with foreign companies to produce and develop military products. In other words, overseas companies are allowed to enter the defence sector through cooperation with local companies. With the support of the recent sharp rise of the defence budget, the defence industry is becoming lucrative. The new law supports the transfer of technology and encourages cooperation with other countries to develop and produce new products. It also provides for many of the industry’s needs, such as substantial contracts, financial guarantees, human resource development programmes and fiscal incentives (tax or duty exception). It has also brought about the establishment of the Committee for Defence Industry Policy, chaired by the president.
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