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Jakarta Post

The mandate for procurement adjustment

  • Yusuf Setiaji and Curie Maharani

Jakarta   /   Mon, March 25 2013   /  11:17 am

The enactment of the Law on the Defense Industry (LoDI) is seen as a significant breakthrough since it mandates the government to prioritize the domestic industry in arms procurement. The law implies that the government is willing to take advantage of defense procurement as a tool of industrial policy, that is to create, maintain and protect necessary industrial capability at a certain cost premium (costs incurred due to local content requirements).

A cautious approach is crucial in translating this spirit into practical guidelines, however.

The Indonesian Military’s (TNI) Minimum Essential Forces (MEF), under which the procurement program is listed, is set to conclude within 15 years (2010-2024). The first-three years have passed, and yet the value of local procurement remains small: 13 percent of total arms in 2011. The figure is expected to rise significantly from Rp...