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Jakarta Post

PT PAL gets $250 million to build submarines

  • The Jakarta Post

    The Jakarta Post

Jakarta   /   Tue, February 18, 2014   /  11:41 am

State-owned shipbuilder PT PAL Indonesia will get up to US$250 million in state capital injection (PMN) under a multi-year project for the development of submarines to support the nation'€™s defense system.

Of that amount, $180 million will be channeled this year, according to Deputy Finance Minister Bambang Brodjonegoro at a hearing with lawmakers at the House of Representatives on Monday.

Bambang added that out of the $250 million given to PAL, $150 would be used for the construction of the shipyard, $30 million for '€œconsultation'€ and that $70 million would be spent on personnel, such as experts and technicians.

The PMN will be included in the revised state budget (APBN-P) for 2014 and the State-Owned Enterprises (BUMN) Ministry will oversee the matter.

To develop the submarines, PAL will work with South Korean shipbuilder Daewoo Shipbuilding and Marine Engineering (DSME).

Based on the contract between DSME and the Indonesian Defense Ministry in 2011, PAL'€™s shipyard must be completed and ready by November 2014.

The contract also states that the first two submarines will be built completely at a DSME plant in South Korea and that the third submarine will be built completely by PAL in Indonesia through the transfer of technology and knowledge.

Although the project is already running behind schedule, Navy chief of staff Adm. Marsetio claimed that the submarines built at the DSME plant were expected to be completed by 2017, while the one to be built by PAL was predicted to be completed by 2019 or 2020.

'€œThe facilities needed for construction must be ready by November. Therefore, due to the time limit, the budget must be submitted [to the House] by April or May at the latest,'€ said House Commission on defense, foreign affairs and intelligence lawmaker Tubagus Hasanuddin at the hearing.

Part of the Defense Ministry'€™s 2010-2014 Minimum Essential Force (MEF) strategy was that Indonesia would need to procure at least 12 submarines as a deterrent strategy.

Marsetio said that if the transfer of technology was successful, he hoped that after building two submarines at DSME, Indonesia would be able to build 10 of the remaining submarines needed.

However, PAL'€™s absence from Monday'€™s hearing provoked doubts from members of House Commission I, who called on the state shipbuilder to remain committed to implementing the contract with DSME '€œfor a successful transfer of skill and technology'€.

Defense Minister Purnomo Yusgiantoro asserted that the PMN given to PAL must be spent carefully and be beneficial for Indonesia, whether in the form of deterrence, transfer of technology or export.

Purnomo is confident that Indonesia will later be able to export its production.

BUMN Minister Dahlan Iskan, who in 2011 stated that PAL would never work on big projects due to its bad performance that caused state losses of $112 million in 2012, stressed that the injection of funds to PAL was strictly for the country'€™s defense, not for business purposes.

Aside from building capable shipyards, Indonesia must also send 206 technicians and experts to DSME as part of the technology transfer set out in the contract. However, as of February, PAL has only sent 13 people. (dwa)

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